The Czech koruna continued to slowly
weaken yesterday. The unit drifted from
EURCZK 31.42 to 31.47, having touched
31.50 during the day. The market is still
pretty range-bound, as there are no
incentives for the koruna. Today’s 3-year
benchmark auction may hardly affect the
market. Similarly, yesterday late evening government approval for the 2005 budget
will likely have no impact on the exchange
rate. The Government approved 2005
budget draft with CZK 83.5 bn deficit and
CZK 908.4 bn expenditures. The result is in
line with expectation. The deficit narrows
from this year gap of CZK 115 bn. The
2005 deficit excludes the payment of the
CKA loss unlike of this year budget which
will pay CZK 19 bn to the CKA. Despite this
fact the deficit still slightly narrows by CZK
12 bn.
Today, the koruna may stay range bound.
Strengthening of other CE currencies should
act against koruna’s weakness.
ČSOB - Investment Research