The Czech koruna slid as low as 32.83 in
late afternoon trade yesterday. We attributed
the fall mainly to automatic koruna sell
orders that intensified previous slow
depreciation of the currency in the thin
market just before close. Moreover, Finance
Ministry raised public deficit outlook for this year from 5.2 pct of GDP to 6.1 pct of GDP
yesterday. That is another sign the Czech
Republic will not join the EMU before 2009.
The government has been showing little
effort to reduce ballooning public deficit for
long time. However, the announcement had
a very limited impact. There are also rumors
Goldman Sachs and Morgan Stanley are
leaving Central Europe, therefore they are
selling all their CE assets.
Today, we expect some rebound of the
koruna because exaggerated yesterday’s
drop. Traders will be keeping their eye on
the CNB board meeting. Nobody expects
interest rate change nor any action on the
forex market. Nevertheless, board members
could comment on updated CNB’s inflation
outlook.
ČSOB Investment Research