Investiční bankovnictví (Komerční banka)
Currencies  |  March 27, 2013 15:43:00

Crown before the meeting of the board loses

Czech currency today was the hardest evolving currency region. Entry to today's trading day while did not look bad. After opening at 25.76, the course went to the 25.70 level and briefly got even below. Even in the morning, however, the trend began to turn in the afternoon already is above 25.80. During the day, the crown has lost more than half a percent. This Polish zloty and Hungarian forint today basically stagnated.

The slowdown in the Crown did not stand not so much fear of the outcome of tomorrow's Bank Board, but also the strengthening of the dollar euro money market. Uncertainty of dealing with the debt situation in Cyprus raises concerns about developments in other troubled eurozone countries. Strengthening of the dollar against the euro, the strongest level since November last year was reflected in the appreciation of the dollar against the Czech currency.Rate CZK / USD climbed above 20.20 today. Thus, the domestic currency weak against the dollar last last August. And the implementation of stop-loss orders on the currency pair CZK / USD led to today's weakening against the euro and the crown.

Tomorrow to discuss monetary policy meeting CNB Bank Board. Intervention (or verbal) from the central bank, in our view too safe. We believe that central bankers will evaluate the overall risks due to past forecasts only slightly as the downside. Consumer inflation in February was 0.3 percentage points below the CNB forecast and annual GDP growth for the final quarter of last year was also 0.3 percentage points below the CNB forecast. These fundamentals worse, however, reflect the development of the crown. Domestic currency is slightly weaker than the CNB in ??its forecast counted.So do not assume that central bankers used against domestic currency direct intervention in the market is not urgent or even use verbal intervention. Current exchange rate values ??correspond roughly to the current economic situation, needless thus increase volatility. It is also important to realize that neither too weak crown is not desirable because it would lead to a price increase of imports, which would further strain on an already weak consumer demand. In our opinion, CNB uses a direct foreign exchange intervention (or some other measures to influence the market indirectly) only if there is a deflationary risk. It does not matter whether the trigger too strong Czech koruna, decline in inflation expectations, a deeper crisis in the euro area or other factor. The point is that currently there is no deflation, inflation expectations are firmly anchored.

Czech swap yield curve today continued its decline, in its medium and long segment declined by about 4 bb. Government bond yields also declined, but not significantly so. Asset swap spreads thus result in slightly stretched. Czech yields fall to follow their European counterparts.

Author: Jan Vejmělek

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