Czech koruna flies higher after central bank removes cap
By Andrew Schonberg
Date: Thursday 06 Apr 2017
(ShareCast News) - The Czech National Bank has scrapped the cap on the country's koruna currency, which flew higher as the central bank ended a 3-1/2-year pledge to keep the unit weak.
Investors had pushed an estimated $65bn of speculative capital into local assets, betting on a surge in the koruna after the cap was cut, reports said.
The country's central bank said it would not be overly sensitive to initial swings in the koruna. It would only intervene in the case of excessive market moves.
At about 12:52 GMT, sterling was down 1.57% to fetch 31.1562 Czech koruna, while the dollar was down 1.38% to 25.0071 koruna. The euro was down 1.32% to 26.683 koruna.
William Jackson, senior emerging markets economist at Capital Economics, said the subsequent moves in the koruna implied the central bank was intervening heavily in the forex market to prevent significant appreciation for the time being.
"The bank has said little so far, other than that interest rates have been left unchanged and that it stands ready to intervene in the FX market if needed to prevent excessive currency moves," said Jackson.
He added that the removal of the cap came sooner than most had anticipated.
"We will let the dust settle before revisiting our forecasts, but as things stand we think the 'fair value' of the currency is around 25.5/€ (5.5% stronger than its current rate) and we expect it to settle around that level by year-end."
Special promo:
Trading the Forex Market? Visit FXmania.com to get advanced infomation about currencies and the Foreign Exchange
Market.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN