The Czech National Bank began to intervene in the foreign exchange market against the weakening of the koruna. The bank has a large stock of foreign currency in recent years, which increases its exchange rate by selling it on the koruna market. He has begun to fail in recent days due to Russian aggression in Ukraine.
In an international comparison, the CNB has high foreign exchange reserves, the use of which in the exceptional situation in which we currently find ourselves is fully justified, the bank said on the Internet. The bank will not provide further details on operations in support of the koruna.
In recent days, customer queues have begun to form in front of the exchange offices in the center of Prague. Some of them told the online daily Aktuálně.cz that they were going to buy euros due to the rising exchange rate. However, Marek Nácovský, the director of the Interchange exchange office network, told Aktuálně.cz on Wednesday that they did not observe any significantly increased interest from clients.
“This step is fully in line with the CNB’s previous communication. It emphasized the central bank’s readiness to respond to excessive exchange rate fluctuations with its instruments, in line with the controlled exchange rate regime,” the bank said. The bank will not provide further details on operations in support of the koruna.
The koruna has been weakening sharply against both major world currencies since about Monday, February 21. At that time, Russian President Vladimir Putin signed documents recognizing the independence of the territories in eastern Ukraine controlled by pro-Russian separatists, the self-proclaimed Donetsk People’s Republic and the Luhansk People’s Republic. On Thursday, February 24, Russia launched an invasion of Ukraine. Currently, the koruna’s exchange rate is about 25.85 crowns per euro.
The koruna started trading weakening, reversing the direction after the CNB’s interventions. On Friday, around 11 a.m., it was 15 pennies stronger against the euro against Thursday at 25.62 crowns per euro.
Most recently, the central bank intervened in the foreign exchange market as part of the exchange rate commitment from 2013 to 2017. At that time, however, it acted on the market against the strengthening of the koruna and thus kept the exchange rate around 27 crowns per euro.
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