“The Czech currency is supported by a positive mood on the capital markets, a high interest differential and a change in the rhetoric of central bankers related, among other things, to the cooling of inflationary pressures. If this sentiment and macroeconomic development continues, the koruna may also move to stronger levels in the coming months, to the psychological level of 23 crowns per euro,” said Portu analyst Radim Krejčí.
According to him, if weakening inflationary pressures in the world are confirmed in the coming weeks and months and if central banks react to them by adjusting their monetary policies, the Czech currency has no reason to weaken.
A return to weaker levels of around 24 crowns per euro could come at a time when the CNB decides to start a cycle of lowering its key interest rates. This could happen in the fourth quarter of this year, Krejčí added.
The crown broke 23.3 CZK per euro
Economic
In the near future, it is very likely that the koruna will break the barrier of 23 CZK per euro and 21 CZK per US dollar, agreed Purple Trading analyst Petr Lajsek. The pair with the euro could thus create historical highs. “The strong koruna can persist for a long time, I expect a more significant weakening only if the CNB decides to lower interest rates,” he said.
According to him, this could possibly come as early as the third quarter of this year. However, he expects a rather slight weakening of the dollar due to the prospect of interest rate cuts, and by the end of the year the exchange rate to the dollar could be around 21 CZK/USD.
The Czech koruna offers an attractive combination of high yield secured against weakening by the CNB’s massive foreign exchange reserves, stated Cyrrus analyst Vít Hradil. According to him, the market favor of the koruna will not last long. “On the horizon of weeks, favorable market sentiment may still keep the koruna strong, but within months we expect it to weaken towards CZK 23.80 per euro,” he estimated.
The company Ebury, which deals with exchange rate hedging and financial services for businesses, expects the koruna to give up part of its current gains this year and close the year around the 23.90 koruna mark per euro.
“Last year, the koruna strengthened by three percent against the euro, making it by far the best-performing currency in the Central and Eastern European region. It has grown by another 3.5 percent since the beginning of the year,” said Tomáš Kudla, Ebury’s sales director for the Czech Republic and Slovakia. Although, according to him, its further short-term strengthening to below the threshold of 23 crowns is not completely ruled out, it should rather be below the threshold of 24 CZK per euro for most of the year.
The strong koruna hit exporters hard
Economic
