ING Estimates Czech July Intervention at About 15 Billion Koruna

The Czech National Bank probably sold about 15 billion koruna ($608 million) in two weeks through July 28 to stop appreciation in the nation’s currency, according to ING Groep NV estimates.

The “rough calculation” is based on the regulator’s daily reports showing rising koruna amounts that commercial lenders deposit with the central bank, Jakub Seidler, chief economist at ING’s unit in Prague and a former CNB analyst, said in a research note to clients on Thursday.

Seidler’s estimate is the first to gauge the extent of intervention after the koruna approached the CNB’s limit of about 27 per euro and forced policy makers to step into the market. ING forecasts that the central bank will have to sell about 34 billion koruna a month to defend the cap on currency gains. Such volumes would lift foreign-currency reserves to about 50 percent of gross domestic product by September 2016, according to Seidler.

“We still believe the CNB’s position in defending the exchange-rate commitment is strong and it has enough room to defend it until its planned removal in the second half of 2016,” he said. “Rising foreign-exchange reserves and a potential accounting loss from their revaluation once the koruna appreciates is not a problem for the CNB.”

The regulator, which sold 200 billion koruna in November 2013 to weaken the exchange rate, said on July 20 it returned to the market on July 17. It has since been declining to say if it’s intervening further.

The Czech currency slid Wednesday as much as 0.4 percent to 27.14 per euro, the worst drop in four weeks, amid speculation the CNB intervened after the pair touched 27.02 earlier that day. The koruna appreciated 0.2 percent on Thursday to 27.05, according to data compiled by Bloomberg.

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