Koruna Gains as Retail Data Trim Intervention Risk: Prague Mover

The Czech koruna gained the most in five weeks as better-than-expected retail data eased pressure on the central bank to sell the currency.

The koruna reversed an earlier retreat after a data release today showed January retail sales shrank 0.5 percent from a year earlier, less than the median estimate for a 2.2 percent drop in a Bloomberg survey. While the Czech National Bank expects the economy to start recovering this year from its longest recession on record, its forecasts imply a weaker koruna may be needed in the second half, Governor Miroslav Singer said yesterday.

“Retail sales are still falling, but the market expected even worse figures,” said Lubos Kolarik, a currency trader at Komercni Banka AS (KOMB) in Prague, by e-mail. “It’s positive for the koruna because it slightly reduces the risk of interventions.”

The currency gained as much as 0.4 percent after the data release, the most on intraday basis since Feb. 7. It traded less than 0.1 percent stronger at 25.629 per euro by 4:14 p.m. in Prague. The koruna is 4.3 percent weaker than on Sept. 17, a day before Singer first signaled the possibility of interventions.

The $217 billion economy contracted for each of the past four quarters as the government’s austerity program prompted households and companies to spend less, while the euro area’s debt crisis damped demand for Czech exports. The central bank is in unchartered territory after cutting its benchmark interest rate three times last year to 0.05 percent.

“We’re talking about the likelihood of having to intervene in the second half of the year,” Singer said yesterday at the meeting of the Nordic Chamber of Commerce in Prague. To meet the bank’s forecasts for market interest rates, “we may need, in the second half, a slightly weaker exchange rate,” he said.

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

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