KBC Market Research Desk
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New sanctions against Russia weigh on CEE currencies
CNB denies rumors about prepared shift of CZK target
Central European currencies got under pressure yesterday due to passage of a new bundle of sanctions against Russia. The EU and the U.S. agreed on a wide scope of sanctions hitting financial, defence and energy sector. Although Russia has not been a major trading partner for Central Europe (CE countries sell only 2- 4 % of their total exports to Russia), the negative sentiment not only made the rouble fall to its 2.5-month low against the US dollar, but also sent jitters across the CE FX markets. The biggest loser, the Hungarian forint, lost 0.7 % against the euro. Also the Czech koruna weakened slightly, despite CNB’s denial of speculations about its alleged plans to push the current threshold for national currency further beyond the current level of 27 CZK/EUR. The CNB reacted to a Monday’s commentary of trade union chairman Středula, who had voiced concerns that the central bank might make the CZK depreciate again, this time to 28 EUR/CZK. According to the CNB, though, a prerequisite for a shift of koruna´s target value would be a considerable increase in anti-inflationary risk. The CNB reiterated that it would exit its FX intervention regime in the second quarter of the next year at the earliest. After yesterday, it looks that CNB´s rate-setting meeting on Thursday hardly brings any surprise...
Due to empty regional calendar, markets´ attention will focus on events occurring outside the CE today. In addition to the Ukrainian crisis, fresh macroeconomic releases in the US and the Fed meeting will be interesting. We expect new US data to play in favour of the US dollar and consequently weigh on CEE currencies, the impact should not be heavy, though.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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