The koruna breaks through the threshold of 23.90 per euro, for the first time since November 2008. However, it will weaken by the end of June. “Now is a good time to buy foreign currency,” advises economist Lukáš Kovanda.
The Czech currency broke the exchange rate limit of 23.90 crowns per euro on Thursday afternoon. This was the first time since November 3, 2008according to Bloomberg data.
By the way, this just demonstrates how, from the point of view of world events, the Czech presidential election is actually an insignificant matter. At the moment, it is probably the most locally overrated event in the world. If the election were to have any major impact on the domestic economy or even the further fate of the Czech Republic or its statehood, whether in the short or long term, the associated uncertainty would necessarily manifest itself in the weakening of the crown.
Where will the crown go?
The koruna is strengthening thanks to a partial return of optimism to world markets. It is mainly related to opening up the Chinese economy. Beijing eased draconian Covid restrictions late last year, giving good hope that the world’s second-largest economy should grow faster than expected this year. The importance of the Chinese economy is so fundamental that its higher growth will also be reflected in the better performance of the world economy, which is also evidenced by the Czech crown.
Another favorable news is the drop for the koruna gas exchange prices in the EU. These days, they are the lowest since September 2021, which gives good hope that Europe will miss a severe recession, resulting from uncontrolled energy costs. Even this tide of optimism drives the crown higher.
They make energy cheaper. Companies started offering tariffs lower than the government ceiling
In response to the favorable development in the energy market in recent weeks, electricity and gas suppliers are starting to offer tariffs to new clients with prices slightly below the maximum set by the government. This is, for example, E.ON, and innogy is also preparing a new price list. Other large suppliers are also analyzing the situation on the market, where energy prices have started to fall. These will mostly be tariffs with long-term fixation. This follows from information from companies for ČTK. Some smaller suppliers also sell energy below the ceiling level to their existing clients.
Bets on an even stronger crown are already bold
In addition, the Czech National Bank remains ready to intervene by selling foreign exchange for a stronger and more stable exchange rate of the Czech currency, which also supports its strengthening.
However, bets on further significant strengthening of the koruna are bold at the moment. Rather, it is necessary to count on the fact that the Czech currency will surrender part of its profits. At the end of March this year, its exchange rate against the euro should be at the level of 24.20, and at the end of June even 24.35, according to the analytical consensus, as captured by Bloomberg. At the end of this year, the euro should cost even 24.50 crowns.
Lukáš Kovanda: A strong Czech currency makes vacations and imported goods cheaper, helping the government with its debt
During yesterday’s trading, the Czech currency improved its absolute record for the last twelve years, when it strengthened against the euro to a rate of 23.955. It last traded at a stronger level on February 7, 2011, according to Bloomberg data. Still, this week, specifically on Wednesday, it ended trading at its strongest ever close of 23.982, even since October 29, 2008.
