“Starting in January 2022, the CNB will gradually sell part of the income from foreign exchange reserves on the foreign exchange market. The transactions will be carried out in such a way that their effect on the exchange rate is minimal, “said the bank.
According to the central bank, the resumption of the sale is part of the monetary policy normalization that the Bank Board has been implementing since the end of foreign exchange interventions in April 2017. The program was launched in April 2004 and suspended in November 2012 to avoid conflict with interventions.
“There has been speculation about a possible start of sales for a long time, as the koruna is not strengthening much despite the expected rapid rate hike. Although the CNB will try not to influence the market too much, it can be expected that it will have a positive effect on the koruna, “said Jakub Seidler, chief economist of the Czech Banking Association. Given the size of foreign exchange reserves, according to him, the move announced on Thursday is desirable also because they will continue to grow not only by revenues themselves, but also by the inflow of European funds that go through the CNB in order not to affect the foreign exchange market.
Sales of revenues from 2009 to 2012 averaged 83 million euros per month, ie about one billion euros per year (according to the current exchange rate of 25.62 billion crowns). Between 2004 and 2008, they were slightly lower, and not entirely regular, Seidler noted.
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The central bank’s foreign exchange reserves increased significantly in the past, mainly in connection with the termination of interventions and the subsequent strengthening of the koruna’s exchange rate. The central bank ended its foreign exchange interventions in April 2017 after forty-one months. At the end of September, the CNB’s foreign exchange reserves in koruna terms amounted to approximately 3.752 trillion. In November 2013, before the start of foreign exchange interventions, the volume of reserves was 894 billion.
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