Today, strengthening of other CE currencies should act against koruna’s weakness

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