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Risk of Unjustified Czech Koruna Gains Eases, Central Bank Says

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June 19 (Bloomberg) -- The risk that the Czech koruna will appreciate to levels hurting the economy has eased as investors differentiate between central and east European markets, the Czech central bank said.

The koruna held “relatively stable” in 2011 and in the first months of 2012, and the prevailing market forecast is that the currency will remain steady in the coming periods with a “tendency for a very moderate appreciation,” the Prague-based Ceska Narodni Banka said in the annual Financial Stability Report published on its website today.

The koruna has weakened 5.8 percent in the past 12 months, the sixth-biggest loss among 25 emerging-markets currencies tracked by Bloomberg. While the bank said in last year’s report that investors seeking quality assets and returns may put unjustified pressure on the koruna to gain, it now sees a smaller risk of such market moves.

“The main reason is an improved understanding of the Czech economy’s characteristics among analysts and investors, and their increased ability to assess risks of individual economies in the region according to their fundamental indicators,” the bank said in the report.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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