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Czechs Trigger Long-Awaited Koruna Float Without Swiss Shock

  • Board voted to remove limit on koruna after more than 3 years
  • Bets on currency gains lured record amounts of foreign capital
A vendor holds 100 Czech koruna banknotes at a vegetable stall in Holesovicka market hall in central Prague, Czech Republic, on Thursday, Jan. 4, 2017. The Czech Republic posted its biggest ever budget surplus last year after the government spent less than planned and economic growth boosted tax receipts, a rare success that ruling party leaders seized on to stake out their positions before fall elections.
Photographer: Martin Divisek/Bloomberg
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By signaling that its currency cap would end, the Czech central bank’s announcement that it would no longer keep the koruna artificially weak against the euro avoided the Swiss-like market shock and quick gains some investors anticipated.

With resurgent inflation rendering the policy obsolete, policy makers scrapped the cap that has prevented the koruna from appreciating past 27 to the euro since 2013. By 5:30 p.m. on Thursday in Prague, it was trading near its strongest of the day, 26.57, up 1.8 percent.