FxWirePro: CNB removes Koruna-Euro peg

In an apparently anticipated move, the Czech National Bank (CNB) has removed the currency it instated in 2013. Back then, it pegged the Czech Koruna at 27 per euro and since then its forex reserve has increased by more than two folds to 111.7 billion as of February this year. It was well expected that due to diverging economic trend, the CNB will not be able to hold on to the peg and the speculation went rampant after the Swiss National Bank (SNB) surprisingly broke away from 1.2 euro-franc peg in January 2015. However, CNB didn’t choose a similar path and it announced well in advance that it will remove the peg sometime this year.

Czech Koruna has been climbing against the euro since the announcement and is currently trading at 26.67 per euro. The volume is reportedly 50-100 times more than the normal. Expect lots of volatilities in recent trade, but CNB has announced that it stands ready to deploy any or all instruments in its toolbox to prevent unnecessary volatility.

Nomura is forecasting that Koruna would trade as high as 26.15 per euro. We expect the Czech Koruna to strengthen towards 25.8 per euro.