Skip to content
Subscriber Only

Deflation Risk Renders Koruna’s Euro Cap Irrelevant

Updated on

Currency traders are taking aim at the Czech Republic amid speculation that policy makers will have little choice but to weaken the koruna as it seeks to avert deflation.

A measure of volatility jumped this month by the most among 31 major peers as the koruna fell to a six-year low of 28.5 per euro. The exchange rate is so far away from the 27-per-euro cap imposed by the central bank more than a year ago when inflation was the bigger threat that Goldman Sachs Group Inc. says it’s now “odds on” that the ceiling gets adjusted to 30 per euro.