Crowded Trades Eyeing Koruna Gain Imply Scope for Disappointment
- Derivatives price higher koruna volatility but limited gains
- Swiss-style currency cap in final stretch as inflation returns
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Betting on appreciation in the Czech koruna is one of the most popular currency plays this year, yet charts suggest it may not strengthen a whole lot.
Policy makers in Prague say they may remove a Swiss-inspired cap on the currency any time after March 31, after inflation headed back above the Czech National Bank’s 2 percent target. As of January, foreign speculative capital in local assets totaled about 35 billion euros ($38 billion), including in government bonds with negative yields, as investors seek to make a profit from any koruna rally when the cap goes.