The Czech koruna further strengthened
yesterday, as strong koruna demand from
abroad persists. The main driver seems to
be the expectation of the imminent rate hike.
The market is quite convinced that the
central bank will raise interest rates on either
June or July meeting as we saw in
yesterday’s bond tender (cf. bond part).
Some traders are also speculating that the
central bank, which sells euros for korunas
in small amounts to dissolve returns it
makes on its vast foreign exchange
reserves, is backing the strengthening trend.
Moreover, dividend scare looks for now overdone.
Today, there is pretty big chance the koruna
continue to rise today. We see the unit to attack the level of 31.30.
ČSOB - Investment Research