The koruna continued on its way down

Investors continued to flee from emerging markets yesterday and the Czech koruna suffered as other currencies in the Central Europe did. The koruna opened at EUR/CZK 28.75 and was under weakening pressure in the morning. It even tested barrier at 28.85. However, the attempt inspired euro-sellers to enter the market and the koruna pared all losses. Nevertheless, it wasn’t the end of the story. In the afternoon another round of koruna selling came after the forint lost ground. In the end the koruna broke through the 28.85 barrier to close at 28.86. The market completely ignored domestic events (CPI and 2-year tender). Falling stocks and bonds pushed investors to flee the country. Today, the GDP figure may grab attention. The economy grew by record-high 6.9 % in the last quarter of 2005 driving mainly by foreign demand. The figure is far above all expectations thus it pushed the koruna to pare more than all yesterday’s losses. However we doubt the koruna break through 28.62 and may stay around the 28.70 level.