The Czech koruna paddled against the rest of the region yesterday,

The Czech koruna paddled against the rest of the region yesterday, as it touched 1-week low EUR/CZK 28.80. At the same time the regional peers moved south. The currency was pretty volatile, as it rose to daily high at 28.60 to drop to 28.80 later. However, the koruna wasn’t so down in the end as it closed at 28.70.

The koruna fell on back of vice-governor Singer comment. He ones again repeated its words that the koruna is strong and the central bank may eventually lower interest rates to harm the koruna. His interview was rather long with many contradictional ideas. He complained, that communication of the Board with the market was wrong ahead the last meeting etc. Nevertheless, due to that misleading communication of the Board we are reluctant to assess Singer’s warning as really significant. Therefore, we expects the rates to be flat even after the upcoming meeting. Singer only raised uncertainty about the meeting, thus the koruna might be under weakening pressure in days to come. But it likely shoot up after neutral result of the meeting. Czech koruna fell on Singer’s warning There was another important event yesterday. According to the Ministry of Industry Hyundai is going to say final “yes” to its investment in the Czech R. on Monday. It might have positive influence on the market. Finally, rise in the U.S. dollar has some negative effect on the region in the afternoon.

Today the koruna may slightly weaken as strong dollar and Singer’s warning may affect the market. Rumors on Hyundai may hinder the fall.

(CSOB - Investment research)