The Czech currency opened weaker on Wednesday's morning at 30.460 and during
a while dropped as far as at 30.690. It stabilized on the 30.600 level and
closed at 30.590. Against the dollar the koruna's rate developed almost the
same. In the morning, it opened weaker at 31.100 and fell to 31.370.
However, the afternoon's slide of U.S. stock prices significantly helped the
euro to rise versus the dollar and retraced the USD/CZK bellow thirty one's
koruna level. The USD/CZK closed at 31.000. This morning the koruna started
at 30.590 per euro and at 30.930 per U.S. dollar. August industrial output
shouldn't have any impact on the koruna, but we cannot exclude another rush
of foreign investors as the Irish referendum will take place on Saturday,
October 19. We anticipate the EUR/CZK to be curbed between 30.450 - 30.750
and the USD/CZK from 30.700 to 31.200.
A member of CNB's bank board Michaela Erbenova told CTK in an interview
yesterday, that another interest rate cut wasn't ruled out with regard to
the current inflation forecast of the CNB. The main reason for a possible
rate cut is the risk of a slowdown of economic growth due to uncertainty
about developments abroad. In spite of growing inflation in next year an
inflation pressure will remain weak, said Erbenova. The possibilities of an
exchange-rate correction are not exhausted by far, said Erbenova to the
koruna's rate. From long-term view she warned against the public finance
condition, its outlook is not fully consistent with a quick adoption of the
euro. The year 2007 appears to be the earliest realistic date, Erbenova
said.
Nervousness in upcoming days around the Central European currencies
including the koruna is founded on concerns from the Irish rejection of the
Nice Treaty on October 19, which may delay the accession of the Hungary,
Poland, the Czech Republic, Slovak and six other mostly East European
countries to EU in 2004. We expect that the koruna and the other currencies
might be under the pressure. In the near-term (one month) the expected rate
cut by the CNB seems to be another risk factor (October 31). We anticipate,
these events should push the koruna to weaker levels for a short time and
that is why we think the period is haymaking for hedging deals.
open max min cls open 10/10
EUR/CZK 30,460 30.690 30.410 30.590 30.590
USD/CZK 31.100 31.370 30.970 31.000 30.930
Stepanka Kuzilkova, Investment Research, CSOB