The Czech koruna dropped to two-month lows in choppy trade yesterday. Initially, it started to march south, as weakening dollar lifted some jittery from emerging markets. Moreover, the strong industrial output in January was in tact with the price action. However, the situation reversed quickly, and the whole region began to sank towards new lows. The koruna touched low at 28.92 EUR/CZK, while a few minutes before bottomed out at 28.60. However, most of deals were done in between the 28.65/88 range and the market closed the session at 28.85.
Today t he February PPI figure may not be significant for the market. Overall sentiment toward the region might again decisive. However, the koruna even yesterday prove solid resistance to a weakening pressure, as the zloty or the forint lost more. Therefore Czech currency may trade again within the 28.70/90 range today. Nevertheless, we put the risk that the koruna could break lower from the band. Tomorrow, the market may watch the January current account data, which may show only negligible deficit.
(CSOB - Investment research)