Koruna Retreats as Czech Retail Sales Disappoint: Prague Mover

The Czech koruna slid as a bigger-than-expected decline in retail sales added to the case for the central bank to sell the currency.

The koruna depreciated 0.3 percent to 25.909 per euro by 10:53 a.m. in Prague, the largest retreat after New Zealand’s dollar today among 31 major currencies tracked by Bloomberg.

Czech retail sales shrank 2.7 in June from a year earlier, compared with the median estimate of 13 analysts for a 0.5 percent contraction, data published today by the Statistics Office showed. The likelihood of the first koruna sales in more than a decade is increasing, the Czech National Bank said on Aug. 1 after reducing its 2013 gross domestic product forecast.

“Demand is weak” and this “should translate into looser policy via koruna sales,” Martin Lobotka, an economist at the Prague unit of Erste Group Bank AG, wrote in e-mailed comments on the retail data. “The crucial thing to see before the next CNB meeting in September is inflation for July and August.”

While the CNB’s board rejected a proposal to start currency interventions in the first formal vote on the unconventional monetary-easing tool on Aug. 1, some opposing rate setters are softening their resistance, Governor Miroslav Singer said the same day.

Zero rates have prompted policy makers to debate if koruna sales are needed to battle the longest Czech recession on record, which pushed inflation below the bank’s target. The koruna is 5.2 percent weaker than on Sept. 17, a day before Singer first signaled readiness to sell the currency.

Inflation data for July to be released on Aug. 9 may show prices grew 1.6 percent from a year earlier, the same pace as in June and compared with a three-year low of 1.3 percent in May, according to the median estimate of 15 analysts.

Czech government bonds gained today, lowering the yield on 10-year notes by three basis points, or 0.03 percentage point, to 2.22 percent. The rate jumped 10 basis points last week to a month high, according to generic indexes compiled by Bloomberg.

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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