The Czech koruna managed to gradually recover from last spring’s sale and is only 3.2 percent weaker against the euro in the year since the beginning of the pandemic. It even strengthened by 7.9 percent against the US dollar and is the strongest since 2018. This was said by Purple Trading analyst Štěpán Hájek.
However, at the beginning of the pandemic, he did not look good at all with the koruna, when the aforementioned overflow of capital from risky emerging markets, which also includes the Czech currency, first came to safer bonds such as the US dollar or government bonds. The koruna thus reached the euro to the level of CZK 28 / EUR, where it was significantly helped by the change in the monetary policy of the Czech National Bank.
After that, the koruna took advantage of the gradually improving sentiment on world markets and renewed appetite for risk, which helped it relatively quickly correct its losses and get from CZK 27.94 / EUR to the current CZK 25.73 per euro.
Against the background of positive expectations, the dollar weakened significantly and the koruna moved from CZK 23.06 / USD to the current CZK 21.23 / USD from the sale.
According to Hájek, the strongest story in the foreign exchange markets is connected with the US dollar, which was initially under strong pressure from growing demand since the beginning of the pandemic, as investors wanted to find security in the markets. The dollar thus reached 1.0632 on the most watched currency pair EUR / USD, which was the strongest level since April 2017. However, the US Fed cut interest rates twice, launched a quantitative easing program and, according to it, gave the markets a clear signal that it will not fall. However, this had a negative impact on the US currency, which subsequently began to weaken along with confidence in its stability, he added.
Meanwhile, positive sentiment began to return to financial markets, with stock indices attacking new historical highs. According to Hájek, there was not much reason for investors to hold the dollar, which lost its value every day. The dollar weakened to 2.5-year lows and helped the EUR / USD currency pair to reach the same milestone. At the same time, the euro would probably not have reached such high levels without a sharp weakening of the US dollar. Since the beginning of the pandemic, it has grown by 12.13 percent to the current 1.2113 EUR / USD.
By far the biggest drop was in the Venezuelan Bolivar, which has weakened by 2,345 percent since the beginning of the pandemic from 73,400 to 1,783,300 Bolivars per dollar. The Venezuelan currency has been in sharp decline for several years, but the coronavirus pandemic has exacerbated the economic crisis. Other South American currencies are also under pressure. Brazil has failed to stop the decline of its currency, which has weakened by 23.4 percent since the pandemic from 4.32 to 5.38 real for one dollar, Hájek added.
Source: Tyden.cz by www.tyden.cz.
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