The Czech koruna has weakened 6 percent against the euro since the coronavirus outbreak began in March to CZK 27.15/EUR, while the United States dollar now sells for CZK 25.10 / USD, a 10 percent weakening. The shift is being caused primarily by concerns from stocks and bonds traders that the restrictions on daily life around the world will have a cumulatively disastrous effect on the world’s economy. Some Czech economists are blaming the fall in Czech interest rates ordered by the country’s national bank, which had just begun to increase its base rate before the pandemic reached Europe. But a lack of foreign investment as share markets collapsed globally has also had a major impact. While the Czech currency was temporarily bolstered by the news that the government will allow its economy to open up more quickly than expected, the Central Bank is expected to reduce rates by another 50 bps this week to just 0.5 percent to combat the expected recession. With little room to cut rates after that, many economists anticipate it will be the last interest rate cut of the year.
