The Czech koruna has been losing value, reaching 25.50 per euro after a six-week slide. Economists polled by Hospodářské noviny say that investor expectations fueled by uncertainty over the change in the pace of change of interest rates is behind the devaluation. Most believe that the trend will reverse by the end of the year and that the koruna will again begin to strengthen. It had firmed to 25.20 at the end of January, but now finds itself at its lowest ebb in seven weeks.
“The Czech National Bank raised rates as expected at its last meeting in February, but it only sees room for one more increase of 25 bps,” said ING Bank’s chief economist Jakub Seidler. He added that until this point, some national bank council members were pushing for a quicker push towards higher interest rates. Most investors expected rates to rise four times in a row, which would have created a bigger gap begween Czech and Eurozone rates, which haven’t begun rising yet, writes HN.
