2 March 2023

Czech crown reaches strongest position against the euro since 2008

The Czech crown broke the 23.40 per euro level yesterday afternoon. This was helped by several favourable conditions, such as the positive mood on global markets and the easing of the energy crisis in Europe.

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Another factor is the high positive interest rate differential, which has increased the attractiveness of the koruna for foreign investors, as the prime rate in the Czech Republic is 7% compared to 2.5% in the euro area. The Czech National Bank's commitment to prevent a significant depreciation of the domestic currency also contributed to the koruna's growth. As a result, the koruna has continued to appreciate despite less positive fundamentals and a significant current account deficit on the balance of payments.

A strong Czech crown can reduce inflation by making imported goods, including energy commodities, cheaper. It is also beneficial for Czech tourists, who can travel abroad cheaper because they get more euros for the same amount in CZK. On the other hand, it can be a problem for domestic exporters, as it increases their prices on international markets and can threaten their competitiveness.

Although the CZK has been gradually strengthening against the euro since mid-November, it is still more than 40 cents away from its absolute record. The previous record was set in July 2008, when it reached 22.97 crowns per euro.