Initially it inched lower to 28.90, but quickly changed direction as the mood on emerging markets changed. Moreover, high surplus of the current account in January at CZK 4.1 bn backed the trend. Low outflow of dividends and contribution to EU budget improved C/A. Therefore the koruna traded at 28.85 at mid of the day. It firmed further in the afternoon, as rise in yields on core markets finally abated. As a consequence, the koruna closed near the stronger limit of current trading band 28.65 at 28.70.
Today the koruna might be less volatile, as no data are due. Improvement of the mood in the region may help the Czech currency, but breaking through 28.65 need some effort. If it succeeds stop-loss orders may push the koruna further south. However main scenario is that the barrier will hold.
(CSOB - Investment research)