The Czech currency erased a bulk of its previous losses yesterday as the EUR/CZK dipped back below the 28.5 level and closed at 28.44. Though many will interpret the koruna’s firming as a reaction to hawkish interview CNB vice governor Singer (more in the fixed-income section), the truth is that it was Czech exporter, which utilized koruna’s easing for hedging and actually helped the currency recover. Nevertheless, the fact that the koruna was unable to score after Singer’s hawkish comments make us feel that the recent negative sentiment against the koruna did fly away.
Today, given the uncertainty in emerging markets ahead the August US core inflation the Czech currency will probably stay in wait-and-see mode, hence sideways trading is the most probable scenario.
(CSOB - Investment research)