Bloomberg News

Czech Koruna Strengthens From Six-Month Low on Fed: Prague Mover

January 14, 2013

The koruna gained from a six-month low as a Federal Reserve president said the U.S. central bank should continue to stimulate the world’s largest economy, boosting appetite for riskier assets.

The koruna strengthened 0.1 percent to 25.606 per euro by 2:31 p.m. in Prague, paring this month’s loss to 2 percent. It reached 25.643 on Jan. 11, the weakest level on a closing basis since July 6, after Governor Miroslav Singer said the Czech National Bank may sell the currency this year to help stimulate the economy out of a recession.

Most European stocks rose and the euro appreciated to its strongest intraday level in 10 months against the dollar after Federal Reserve Bank of Chicago President Charles Evans said the central bank should continue to support economic recovery.

“Central European currencies could be supported this week by the euro’s gains against the dollar,” analysts Jan Bures and Jan Cermak at CSOB AS in Prague wrote in a report to clients today. The koruna’s appreciation will be limited “because of the CNB’s rhetoric,” they said.

The CNB cut its main interest rate three times last year to 0.05 percent as the economy shrank for three quarters. More accommodative policy “could be achieved by influencing the exchange rate,” according to the CNB’s minutes from its Dec. 19 meeting, published on Dec. 31. Currency interventions are the “best way” to ease conditions, Deputy Governor Vladimir Tomsik wrote in an article in the Hospodarske Noviny newspaper Jan. 4.

Last week’s 1 percent retreat lowered the koruna’s 14-day relative strength index to 24, below the 30 level that indicates in technical analysis that the asset may be oversold and poised for a rebound. The RSI rose to 27 today.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net


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