Koruna Depreciates as Police Detain Premier’s Aide: Prague Mover

The koruna slid the most among the world’s major currencies after police raided government offices and arrested people including an aide to Premier Petr Necas.

The Czech currency depreciated 0.5 percent to 25.720 per euro by 6:27 p.m. in Prague, compared with gains of 1.1 percent for Hungary’s forint and 1 percent for the Polish zloty, data compiled by Bloomberg show. The cost of credit-default swaps insuring the government’s bonds rose to a two-month high.

Necas said today he has no reason to resign after police detained Jana Nagyova, head of his office. The police’s organized-crime unit last night raided several government buildings, including the premier’s office, spokesman Pavel Hantak said. Necas is entering his fourth year in power after having defeated a rebellion over austerity measures within his own party. He now has to contend with an opposition emboldened by an opinion-poll lead a year before elections.

“Some market players may be concerned about the possible new elections and a change of direction of the government,” David Sykora, chief currency trader at CSOB AS in Prague, said by phone today. “The impact will be limited. In a longer term, the market doesn’t care who’s in charge, and the koruna will continue to be driven by global sentiment.”

Opposition Pressure

The lower house of parliament adjourned deliberations and will reconvene at 9 a.m. in Prague tomorrow, when Necas will attend, Miroslava Nemcova, the chamber’s head, said in a statement. The Social Democrats, the largest opposition party, is meeting tonight to decide whether to initiate a no-confidence motion against Necas. The Communist Party has called on him to resign.

The koruna is 1.3 percent stronger than on May 21, a day before the U.S. Federal Reserve signaled readiness to scale down its economic stimulus, driving investors to the world’s safest assets. The gain is the biggest during the period among major emerging-market currencies tracked by Bloomberg.

Czech bonds have the highest credit ratings in emerging Europe, on par with Estonia, and are the cheapest to insure with credit-default swaps in the region. The contracts, which rise as perceptions of creditworthiness worsen, increased as much as six basis points today to 63, the highest since April 3, and last traded at 60. The price compares with 71 basis points for higher-rated France, data compiled by Bloomberg shows.

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