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The EUR/CZK has moved back about the former (FX) intervention level set by the CNB at the 27.00. After CNB’s exit from the intervention regime (April 6) the koruna has only twice briefly touched this level, but it had never moved about the EUR/CZK 27.00 level on a sustained basis.
"Generally, we expect the koruna to be volatile in the coming weeks and months, possibly in both directions. The main reason is the relatively ‘overbought’ position of the koruna before the end of interventions. “Too” many bets on a stronger koruna were opened before the interventions were stopped," KBC Research commented in its latest report.
Overall, the long koruna positions could reach up to EUR50‐60 billion at the end of the intervention regime. This is much more than the estimated surplus of the current account of the balance of payments (for 2017 EUR3 billion) and the estimated external trade surplus (EUR13 billion). According to these measures, the koruna was simply ‘overbought’ before the end of interventions.
If some of the players on the markets want to reduce their long koruna positions, they may not always find strong enough counterparties. Missing counterparty problems can cause losses for the Czech koruna in the coming weeks and months.
