Not only the autumn intensification of the pandemic, but also problems with the supply of chips caused a significant weakening of the koruna a few weeks ago. But now she is shining for better times. In addition, it could receive another positive impulse from the CNB on Wednesday. The central bank is expected to tighten monetary policy again by 0.75 percentage point to 3.5 percent.
“If this really happens, it will be the third above-standard rate increase in a row,” recalls Jiří Tyleček, chief analyst at XTB.
According to Česká spořitelna economist Michal Skořepa, the growing reason that the CNB will raise interest rates again at an unusually sharp pace to stop rising inflation is the main reason for the strengthening of the domestic currency. “The factors that sent the koruna to weaker levels last month are not declining,” warns Skořepa.
“After the formation of Fiala’s government, political risk has also subsided, and foreign investors are once again starting to focus on the interest rate differential vis-à-vis the eurozone,” says portfolio manager at Cyrrus Tomáš Pfeiler. According to him, the koruna’s exchange rate is still relatively weak in the context of economic development.
“If I learned in the summer that rates would exceed three percent at the end of the year, I would not believe that the koruna will trade above the level of 25 crowns per euro. I would rather expect it to be closer to 24 crowns per euro. The persistent risk aversion among currency speculators also prevents a more significant strengthening, ”thinks Pfeiler.
According to experts, Wednesday’s comment by CNB Governor Jiří Rusnok will be crucial for further development. Unless there is a surprise in the bank’s monetary policy, the koruna should strengthen in the coming weeks. Already in January, it should fall below 25 crowns per euro.
The effects on the domestic economy should not be significant. “The appreciation of the koruna is not yet high enough to limit exports. The Czech economy is dependent on the automotive industry, and the persistent shortage of semiconductors is a bigger problem for this, ”explains Finlord analyst Boris Tomčiak. “However, the supply of components is expected to increase next year, and thus the strong economic growth of the Czech Republic can be expected,” he adds.
What are the program priorities of the new Czech government
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Government: Program priorities • VIDEO Videohub E15
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