Czech Koruna Weakens on Speculation Two Week Rally Is Overdone
The koruna slid from its strongest level in more than two years versus the euro on speculation the Czech currency’s rally in the past two weeks was overdone.
The Czech currency weakened 0.3 percent to 24.413 per euro as of 4:05 p.m. in Prague after appreciating to 24.310, its strongest intraday level since November 2008.
The koruna’s 2.5 percent gain this month, the second- biggest among more than 20 emerging-market currencies after the Colombian peso, lifted the 14-day relative strength index for the koruna-euro to 77.5 yesterday. Readings higher than 70 are an indication an asset’s price may decline, according to technical analysis. The koruna’s RSI was 71 today.
“Such a significant appreciation is unsustainable in the long term,” economist Jan Vejmelek at Komercni Banka AS, the Czech unit of Societe Generale SA, wrote in a report today.
Czech industrial output jumped an annual 15.9 percent in November after a 6.9 percent expansion a month earlier, the statistics office in Prague said Jan. 7. That beat a median estimate for a 12 percent growth by 12 analysts in a Bloomberg survey. The export-oriented economy had a foreign-trade surplus of 11.8 billion koruna in November, a Jan. 6 report showed.
“Given the growth dynamics of the industry and exports in the past months, it is difficult to find fundamental reasons for a major weakening of the Czech koruna,” Prauge-based Vejmelek wrote in the Komercni Banka report.
To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
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