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Koruna Weakens From Month High as HSBC Says Sell: Prague Mover

The koruna slid from a one-month high against the euro as HSBC Holdings Plc. said gains were “not justified” and recommended selling the Czech currency.

The koruna lost 0.6 percent to 25.45 per euro by 4:51 p.m. in Prague, ending a 1.3 percent rally over the previous two days and paring gains this week to 0.6 percent, the smallest weekly advance in a month. The currency climbed to 25.263 yesterday, the strongest intraday level since Dec. 19.

The koruna is poised to weaken to 26.6 per euro, Murat Toprak, chief currency strategist for Europe, the Middle East and Africa at HSBC in London, wrote in a report issued late yesterday. Decelerating inflation means that the central bank can keep borrowing costs at a record low and use the koruna’s weakness to cushion the export-led economy’s slowdown, Toprak said.

“The koruna’s rise is not justified and the recent fall of euro-koruna offers an attractive entry level,” Toprak wrote in the research note. “In the context of slowing growth, currency weakness would be welcomed. Therefore, currency intervention and, or rate hike risks are minimal.”

A lack of domestic inflationary pressures means interest- rate increases or other measures to tighten monetary policy are not needed in the “near term,” central banker Pavel Rezabek said today in an interview.

The Czech National Bank may keep its benchmark two-week repurchase rate at 0.75 percent throughout 2012, Governor Miroslav Singer said yesterday in a separate interview. Czech inflation slowed to 2.4 percent in December, from 2.5 percent in the previous month, government data showed.

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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