Bloomberg News

Koruna Weakens as Police Raids Pressure Premier: Prague Mover

June 13, 2013

The koruna weakened the most among the world’s major currencies as police arrested several people in raids, including at government offices, which put Prime Minister Petr Necas under pressure from the opposition.

The Czech currency depreciated as much as 0.6 percent and traded 0.4 percent weaker at 25.679 per euro by 4:01 p.m. in Prague, compared with a 0.9 percent advance for Hungary’s forint and a 0.5 percent gain for Romania’s leu, data compiled by Bloomberg shows. The cost of credit-default swaps insuring the government’s bonds rose to a two-month high.

One of Necas’s aides was among several people detained in a raid last night by the police’s organized crime unit, the Prague-based iDnes.cz news website reported today, citing an unidentified person familiar with the case. Police action, which included raids at government offices and at the Defense Ministry, started last night and still continues, Pavel Hantak, a spokesman for the organized crime unit, told reporters in Prague today. Hantak declined to say who was detained.

“Some market players may be concerned about the possible new elections and a change of direction of the government,” David Sykora, chief currency trader at CSOB AS in Prague, said by phone today. “The impact will be limited. In a longer term, the market doesn’t care who’s in charge, and the koruna will continue to be driven by global sentiment.”

No-Confidence Motion?

The lower house of parliament adjourned deliberations and will reconvene at 9 a.m. in Prague tomorrow, when Necas will attend, Miroslava Nemcova, the chamber’s head, said in a statement. The Social Democrats, the largest opposition party that leads in opinion polls a year before elections, will meet at 6 p.m. to decide whether to initiate a no-confidence motion against Necas. The Communist Party has called on him to resign.

The koruna is 1.4 percent stronger than on May 21, a day before the U.S. Federal Reserve signaled readiness to scale down its economic stimulus, driving investors to the world’s safest assets. The gain is the biggest during the period among more than 20 emerging-market currencies tracked by Bloomberg.

Czech bonds have the highest credit ratings in emerging Europe, on par with Estonia, and are the cheapest to insure with credit-default swaps in the region. The contracts, which rise as perceptions of creditworthiness worsen, increased four basis points today to 61, the highest since April 12. The price compares with 72 basis points for higher-rated France.

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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