The Czech central bank followed its Polish counterpart and intervened in the market to strengthen its currency as Central European policymakers sought to support markets in the wake of post-Russian invasion of Ukraine.
The Polish central bank coordinated its intervention with the Czech, a source told Reuters.
The Czech bank had earlier said it was “active in the foreign exchange market and conducting operations to mitigate excessive fluctuations and the devaluation of the koruna.”
The Czech intervention boosted the koruna by 0.7% against the euro after the announcement, while the Polish zloty fell 0.9%, remaining under pressure along with the Hungarian forint.
Central Europe is facing the effects of the Russian invasion of Ukraine on February 24, as well as the harsh Western sanctions imposed, shaking global markets and pushing investors into safer assets.
The koruna has lost about 5% and reached a 10-month low near 26 against the euro this week, while the zloty sank to a 13-year low and the forint to new historical lows.
“The intervention is a clear message from the Czech central bank that further weakening of the currency would not be comfortable for them. It is also a message that further weakening of the koruna is not possible,” said Komercni Banka analysts.
The Czech central bank has large reserves that it created between 2013-2017, when it bought foreign currency to keep the koruna low.
Reserves amounted to about 66% of GDP at the end of January.
Poland’s central bank had also said twice this week that it had sold foreign currency in support of the zloty.
The Hungarian central bank declined to comment on whether it intervened in the market today but said it was “ready to intervene using any means at its disposal to ensure the stability of local financial markets”.
On Thursday, the Hungarian central bank raised its one-week deposit rate by 75 basis points, the largest increase since 2008.
Policy makers across central Europe have sharply raised interest rates since last year to fight inflation, which is expected to move higher amid rising energy prices as a result of the conflict in Ukraine.
Source: Capital
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
