Czech Republic: Czech koruna posts sharpest monthly fall in two years
October 13, 2011
On 30 September, the Czech koruna traded at CZK 24.8 per EUR, which represented a 2.6% nominal depreciation compared to the CZK 24.1 per EUR observed last month, and marked the sharpest monthly drop since October 2009. The September depreciation ended the almost uninterrupted positive trend observed since January and, at the current level, the koruna is trading 0.6% weaker than the same month last year. That said, the koruna has appreciated an accumulated 1.2% versus the EUR this year, following a strong 3.9% appreciation in August. The depreciation of the Czech koruna versus the EUR follows the recent weakening of the euro, which by 30 September depreciated 7.1% in nominal terms against the USD, as market participants remain cautious about the challenges faced by policymakers in the Eurozone as they struggle to find a solution to the ongoing debt crisis. Meanwhile, Czech monetary authorities recently stated that fiscal austerity measures in the Eurozone are likely to hurt demand for Czech exports, and risks to its economic forecasts makes lower interest rates ?significantly? more probable.
Author: Ricardo Aceves, Senior Economist