The Czech koruna snapped two days of losses after Vice-Governor Mojmir Hampl damped speculation the central bank will sell the currency.
The koruna strengthened after Hampl said in an interview with Bloomberg News published today that the risk of deflation in the Czech economy is not high enough to warrant the first market intervention in a decade. Governor Miroslav Singer said a week ago the central bank is debating whether to loosen conditions by selling the koruna in the second half of the year.
“For me personally, a trigger for interventions would be the moment when I see a highly probable risk of a long-lasting, devastating deflationary spiral,” Hampl said. “It can’t be ruled out that this risk will appear in the future, but I don’t see it materializing for now.”
The Czech currency gained as much as 0.3 percent after Hampl’s comments and traded 0.1 percent stronger at 25.601 per euro as of 4:02 p.m. in Prague. It is 4.1 percent weaker than on Sept. 17, a day before Singer first signaled the possibility of interventions to counter the nation’s recession.