Koruna Gains as Retail Data Curb Intervention Bets: Prague Mover

The koruna rebounded from trading close to its weakest level in six months as better-than-expected retail sales data eased pressure on the Czech central bank to sell the currency.

The koruna snapped a three-day retreat as the statistics office in Prague said retail sales fell 5.1 percent in December from a year earlier, beating the median estimate. Sales adjusted for the number of working days slid 0.4 percent. Czech monetary policy makers, scheduled to meet tomorrow, cut the main interest rate three times last year and said weakening the currency may be the next move to stem the country’s recession.

“From the central bank’s perspective, today’s figure should be cautiously optimistic” as it signals “the worst is over as far as household consumption is concerned,” Martin Lobotka, an economist at Ceska Sporitelna AS in Prague, wrote in a report to clients. “If we add the questionable efficacy of proposed interventions against the koruna, we don’t think the Czech National Bank should launch them tomorrow.”

The Czech currency gained 0.2 percent to 25.643 per euro by 3:24 p.m. in Prague, snapping a 0.3 percent retreat in the previous three sessions. Yields on the government’s five-year koruna bonds rose two basis point, or 0.02 percentage point, to 0.91 percent, generic indexes compiled by Bloomberg show.

The median estimate of 11 economists in a Bloomberg survey was for a 5.7 percent drop in sales.

The central bank reduced the interest rate to 0.05 percent last year.

The koruna is still down 2.2 percent this year and 4.3 percent since Sept. 17, a day before Governor Miroslav Singer first signaled the possibility of a market intervention. The CNB last stepped into the market to weaken the koruna more than 10 years ago, buying $438 million and 444 million euros ($600 million) in September 2002, according to data on its website.

’Sufficient Cause’

Ceska Sporitelna recommended buying the koruna a week ago, saying the slump was overdone and the central bank would not intervene at levels between 25 and 26 per euro. The Czech currency could appreciate to 25.30 per euro in three months, the unit of Erste Group Bank AG said in the Jan 28 report.

The CNB is likely to say after tomorrow’s meeting that its outlook on the economy has worsened and may signal it’s in favor of selling the currency, Stanislava Pravdova, an analyst at Danske Bank A/S (DANSKE) in Copenhagen, wrote in a Jan. 31 report.

“We do not think better retail sales should give the CNB sufficient cause to bring a halt to monetary-policy easing,” Jaromir Sindel, a Prague-based economist at Citigroup Inc., wrote in a report to clients today.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net