News International


A new strong koruna: the end of super-cheap loans and bonds

The end of the super-cheap loan is over and the existing bonds will not be paid to investors. Even so, the effects of the foreign bank’s foreign exchange intervention regime on Thursday will look like. What the interventions brought and what they took, the opinions differed. that economies would hurt, but no one claims.

The export, which the interventions were supposed to help increase the sale of their products abroad (made cheaper), clearly helped. According to the proposal of the Association of Exports, for the period from November 2013 to January 2017, companies generated 687 billion crowns and approximately 590 billion.

The demand for Czech imports thus meant the demand of export companies for labor, and thus for employment and wage growth.

Do not be afraid of the intervention of the exporters, moreover, the NB announced it in advance. The last time she talked about the second quarter of this year, she had met. The main exports did not count this, they secured themselves against a new fluctuation for a year and sometimes even two in advance, to Ji Grund, the Association of Exports and the manufacturer of bathroom seats.

According to him, they are used to it. They coped with the strongest exchange rate of about 23 crowns per euro and the weakest darkness of 30 crowns per euro. Exports will now have to compete with cheap imports. It remains to be seen whether they have prepared for this in the last three years.

The interventions were a baldness for speculators. They bought crowns to buy Czech bonds for them.

How does speculation work? Foreign investors bought newly issued Czech crowns for euros and dollars and bought large Czech bonds for them – they borrowed Czech money. They were even willing to pay for the loan, instead of the esk stt paying them for years. They were all doing so with the fact that after the intervention, the koruna will be sent and they will buy more foreign currency for it, they have not invested before, and they will issue it.

Nevdan balk penz

According to David Navrtil, the chief economist of esk spoitelna, the NB launched an incredible 2.5 trillion crowns on the market due to demand from speculators. Of this, the demand from the real economy was about 500 billion k. In other words, so many newly issued pensions will be needed to serve the Czech economy in a total of six years.

The sweat with speculators after the end of the intervention is that their effort to get rid of the mass purchased crowns can be known to take the course. It will depend on how quickly they want to perform this operation. It can even weaken the crown temporarily, so speculators can sell it.

The way investors invested with speculative pensions can determine the exchange rate development in five days, but also in other months, to Marek Dmal, an analyst at Komern Bank. According to him, the exchange rate flies by units of crowns up and down, calmly between 25 and 28 crowns per euro.

The completed intervention should therefore be negatively honored by the Treasury and the Ministry of Finance. The end of super-cheap (even long-term) short-term lending has ended, and Czech bonds will not be invested.

Sttu is in danger of having to raise a bond for years so that the speculator’s failure to replace the speculator is replaced, for example, by domestic banks that will be willing to give it to him. According to the governor, the NB is ready to intervene in the event of large fluctuations in the crown, so that the piston is not too hard after interventions. But first let the market work. According to our calculations, the NB will in the first months armor koruna in the abundance of 25.5 and 28.5 crowns per euro, to Navrtil.

The NB, which bought foreign koruna when buying them, bought foreign currencies – euros and dollars.

If the koruna strengthens a lot in the future, the central bank will lose more than 200 billion crowns and more, to economist and adviser to Finance Minister Ale Michl.

With this, in the case of the NB, which operates according to other rules than the banks of the bank, sweat and the economy should not hurt. These pensions were not spent even by consumer companies. We have for them the best quality securities of the country, their currencies are crushed, and higher profits and they will serve the NB and the foreign exchange reserves of this country, explained by Governor Ji Rusnok.

The latter is not ideal

The aim of the intervention was to start a healthy inflation rate, and thus economic development. Usually, the bank encourages inflation by reducing the rate for years, but here it has not been where the NB rate is at zero and jt and up to disputed values ​​were complications. Therefore, the NB agreed for the first time in history to influence the exchange rate.

The inflation rate of two percent should reach the Czech Republic no later than one year and after the end of the intervention. Whether (end of the intervention) it was sooner or later, we will be sure to come back for years. Most of the time, it is possible that changes in policy changes will be announced a little later than irregularly, to the former NB Governor Miroslav Singer, during whose interventions the interventions started.