18th January 2015

Competitiveness: Czech currency on a rollercoaster

Last week we witnessed significant weakening of the Czech currency. Let’s sum up some facts that led to this scenario and its evolution during the week. As it was already written here the Czech Crown reacted on Friday 9th January on the news of very low inflation rate apart from being influenced by the problems of Eurozone and broke the limit of 28 CZK for 1 EUR. This was followed by the speculation that the Czech National Bank would have to intervene even more to avoid deflation. Although the officials of the Czech National Bank denied the need for the intervention in the near future the debate was stirred up again on Monday when the unfavorable November statistics of retail sales were released. In reaction to this evolution the CZK weakened again by 0.30 CZK during the business day. The outlooks of various institutions and experts were even grimmer, for example GNP Paribas or former central banker Eva Zamrazilová, when they foresaw the CZK to go to 29 or even to the limit of 30 CZK. Also the Wall Street Journal nominated the CZK as the worst performing currency of all currencies of the world and also mentioned how interconnected the Eurozone and Czech Economy are and how low is the Czech inflation.

Members of the American Chamber of Commerce in the Czech Republic