The Slovak currency stayed virtually
unchanged on Friday. The local currency
was still supported by the generally weak US
dollar. Some US investors are trading still
the same pattern: selling the greenback
against the Central European currencies.
Thus, the koruna reached the new all time
high against the US dollar, trading at
USD/SKK 26.67 at the end of the session.
Regarding trading against the reference
euro currency, koruna opened at EUR/SKK
35.54 and strengthened to EUR/SKK 35.49.
However, it weakened slightly in the
afternoon and ended the day at EUR/SKK
35.52. The market showed no interest in the
released state budget balance for the
January – November period.
The deficit
stood at SKK 6.9 bn or almost SKK 0.7 bn
lower compared to the same period of last
year. Total revenues are year to date at the
level of 96.1 percent of the planned amount
while the total expenditures are only at the
level of 81.5 percent. It seems that the total
deficit will be lower than the plan for the
whole year despite the traditional fiscal
loosening in the last month of the year. More
interesting news was that the regulatory
body approved no electricity price hike for
households and a gas price decline by
around 3% effective from January 2007.
This creates more room for a disinflation
trajectory in 2007 and increases the chance
of euro adoption in 2009.
The EU
Commission said that the inflation criterion is
the biggest challenge for most of the new
EU entrants. Slovakia is fulfilling only one
criterion (long – term interest rates) so far.
We reckon that the euro adoption chances
increased and are now comfortable above
the 50% level. Regarding today’s trading, we
expect the koruna to stay within the range of
EUR/SKK 35.40 – 35.65.
(CSOB - Investment research)