The Czech crown – in recent months surging in value against the euro – could yet strengthen further, Novinky.cz quotes analysts as saying. This is good news for people spending crowns abroad, as the purchasing power of the national currency continues to strengthen in many European countries.

Consistent, strong progress

At the time of writing, the crown trades at about EUR 1: CZK 23.4, having recently hit a 15-year high against the European currency. In contrast, this time last year the crown was valued at CZK 24.4 for EUR 1.

“The Czech currency is supported by a positive mood on the capital markets, a high interest rate differential, and the cooling of inflationary pressures.”, says Radim Krejčí, analyst at financial services firm Portu.

This strong progress against both major currencies may well continue. Actions by the Czech National Bank (CNB) have greatly helped in keeping the crown strong. 

The Czech crown is also seen by global investment firms and individuals as a “safe-heaven currency,” which increases its appeal and helps its appreciation.

Not an unequivocally good thing

A strong exchange rate doesn't necessarily benefit everyone, though. Czechia's exporters can be harmed by a strengthening crown due to their goods becoming more expensive for foreign buyers, potentially hurting demand.

A strong exchange rate also has the potential to harm domestic producers, due to increased competition from cheaper imports.

Will this continue?

Petr Lajsek, a principal analyst at Czech financial services company Purple Trading, believes that the Czech crown is likely to strengthen in the short term. The currency, however, may depreciate in the second half of this year if the CNB decides to lower interest rates (this is something especially likely if headline inflation falls). Two months ago the CNB decided to keep interest rates unchanged – they are currently the highest they have been in over two decades.

Author: Prepared by the team from the foreign office CzechTrade Scandinavia.
Source: www.expats.cz, Thomas Smith