The koruna weakened sharply, falling against the euro and the dollar

While a month ago Czech currency strengthened and aimed below 26 crowns per euro, today fell back above 27 crowns per euro. It ended Monday’s trading on the markets at CZK 27.16 / EUR, according to the Patria Online website. That’s about 40 pennies lower than Friday.

“The current weakening is not solely due to the sharp increase in active cases of Covid-19 infection in the Czech Republic, but most of all to the fear that very strong restrictive measures will be introduced in a number of European countries to slow down the pandemic. However, even complete “lockdowns” are not unrealistic at all, as was the case in the spring. Apart from the Czech Republic, the situation in the second and fourth largest economies in the euro area, ie France and Spain, is alarming, ”says Miroslav Novák, an analyst at Akcenta.

“It is already clear that the economic recovery in the third quarter will stop at the end of this year, and unfortunately the quarter-on-quarter decline in GDP in the fourth quarter cannot be ruled out at all. This applies to both the Czechia and the eurozone, “adds Novák. He reminds that the Hungarian forint and the Polish zloty are also heading significantly downwards today, and the European stock markets are also in a lot of red numbers.

“Weakening of the koruna significantly above the level of 27 crowns per euro is very probable due to the circumstances in the coming days and weeks,” Novák expects. Although the CNB Board will probably still leave interest rates unchanged at its meeting on Wednesday, at the November meeting it will definitely go at technical zero with interest rates. “The probability of using alternative monetary policy instruments such as negative interest rates, the exchange rate commitment or the purchase of government bonds is also increasing,” Novák thinks.

Against the dollar even crown she has lost more than sixty pennies since Friday. Monday’s trading ended at 23.15 CZK / USD, while Friday’s at 22.54. The koruna was so bad against the dollar last time two months ago.

In February this year – before the arrival of coronavirus – the koruna reached its highest level since October 2012, for the first time in almost seven and a half years it strengthened below 25 crowns per euro. On the contrary, in March this year it fell to the level of 28 crowns per euro.