Central European Weekly

Inflation Continues to Rise

Tue, Jul 22 2008, 12:24 GMT
by KBC Market Research Desk

KBC Bank


Czech Republic

EUR/CZK breaks below the 23.0 level

Hungary

NBH leaves rates on hold and puts risks to both sides around inflation

Poland

The risk of second-round effects still a major obstacle on the road to lower rates…

Slovakia

Inflation Continues to Rise

The Week Ahead

Very thin calendar

Overview

Central European currencies enjoy strong money inflows

Central European currencies are strengthening significantly, with no correction on the horizon yet. The exchange rates of the regional currencies are being driven to recordbreaking levels by foreign investors, for whom those currencies have become a safe harbour at the time of high volatility on leading markets, which are affected by a simultaneous fear of a downswing of the U.S. economy and of increased global inflationary risks. The inflows in CE Fx markets are primarily short-term investments in short-term money market instruments. This applies to the koruna and the zloty in particular. As far as the forint is concerned, at least some foreign investors have picked government bonds as the destination for their investments.

While the strong koruna is a blessing for importers and tourists who travel abroad, the ever stronger Czech currency is increasingly becoming a burden for exporters that reduces their profit margins with some exporters trying to transfer the FX risk onto domestic suppliers. Too rapid an appreciation, as we can see, is not affecting the ‘big’ economic figures yet and is unlikely to show up soon. Hence we can hardly rely on surprisingly worse eco data to trigger a sale of the local currency, the result of which would be the start of a much expected correction of currencies. Concluding, the a further appreciation of those currencies, whose full impact on the economy will make itself felt after some time, still appears to be the risk for the near future.

Published on  Wed, Jul 23 2008, 11:17 GMT

Archive

KBC Bank  | Havenlaan 12, 1080 Brussels
http://www.kbc.be/dealingroom | piet.lammens@kbc.be

Legal disclaimer and risk disclosure

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.

Interested in forex trading? forex brokerage firms!


MF Global UK Limited
Contact the broker/FDM
Open a demo account		GFT
Contact the broker/FDM
Open a demo account
FXDD
Contact the broker/FDM
Open a demo account		Ingot Brokers
Contact the broker/FDM
Open a demo account		Deutsche Bank
Contact the broker/FDM
Open a demo account

FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)

[Read Premium full description]


Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

©2008 "FXstreet.com. The Forex Market" All Rights Reserved.