The Czech koruna opened at EUR/CZK 29.92 zone and hovered in this zone by the early afternoon on Monday. Nevertheless, just ahead of the closing the unit jumped to a new 28-month high at EUR/CZK 29.83. There was again no particular reason, but overall positive sentiment. The market completely ignored the fact the central bank almost stopped selling yields of its EUR 21 bn reserves in December. The CNB released that it sold only EUR 4 mn on the market in December while in previous months it sold from 34 to 92 millions of euros per month. Thus it’s obvious that even before Christmas the central bank feel inconvenient with strengthening of the koruna. Finally, the government said five companies submit bids in Cesky telecom tender. The bids are around the current market valuation.
Today the calendar is heavy. Above all the minutes from the recent CNB board meeting are due. Thus we could more understand the last rate cut and CNB attitude to the strong koruna. Moreover, inflation sharply dropped in January, namely to 1.7 % Y/Y, thus the central bank has space to fight the strong koruna by lower rates. Nevertheless, low inflation is positive for the bond market, which might lure another investors and that could be positive for the koruna. Thus we expect the koruna to strengthen further today.
ČSOB - Investment Research