Czech crown fastest growing currency

Analysts expect the crown to grow in 2018 but at a slower pace

The Czech crown and Polish złoty were the two fastest growing currencies in 2017. On the other hand, the dollar index, which tracks the US dollar's exchange rate against a basket of six other major world currencies, has fallen by about 9 percent this year.

The Czech National Bank's (ČNB) exchange rate intervention ended in April, and investors then bet heavily on the crowns’ rise.

The ČNB had kept the crown artificially weakened at 27 crowns per euro until the beginning of April. After the intervention ended, the crown gradually strengthened, helped by GDP growth plus wage and inflation growth. The ČNB responded with interest rate hikes.

The crown has appreciated by more than 5 percent against the euro since the end of the interventions, and 17.5 percent against the dollar, according to daily Hospodářské noviny (HN), citing figures to Dec. 12, 2017.

Most analysts polled by HN expect further GDP growth and more tightening of economic policy in 2018. In the middle of 2018 the exchange rate should be 25 crowns per euro, and at the end of 2018 one euro should cost about 24.70, analysts said.

“In the next year, the crown should continue to strengthen gradually, but in general, the pace of strengthening will be slower than we saw this year,” Jakub Seidler, chief economist at ING Bank, told HN.

The other success story of the year was the złoty, up 16.6 percent against the dollar and 4.6 percent against the euro. The euro currently stands at 4.21 złoty and, according to news agency Reuters, could rise 1.5 percent in the next 12 months.

The euro has also improved against the dollar, despite US interest rate increases and continued quantitative easing in the euro area.

At the beginning of the year, one euro could be bought for US $ 1.04, the rate climbed to 1.20 euros per dollar in the course of the year, making it the strongest since early 2015. Currently, it is around 1.18 euros per dollar.

Part of the rate increase is due to better-than-expected economic developments in the eurozone, according to analysts.

According to the latest survey conducted in early December by Reuters, analysts of major financial institutions on average predict that the euro will strengthen to $ 1.22 in the next 12 months.

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