Date: 2008-03-21 15:23
The last week had a clear winner on the forex and it was the US dollar. The US currency gained almost 3% to the euro, 3,5% to the yen, nearly 2% to the British pound and almost 4% to the Swiss frank. There were generally two reasons behind this appreciation. Firstly, the previous appreciation wave of the euro reached 1,59 threshold matching the range of a similar wave in autumn 2007, so some technical correction seemed likely. Secondly, the Fed provided an excuse for such a correction lowering rates “merely” by 75 bp instead of 100 bp expected by the market. However, with the EURUSD hovering slightly above 1,54 at the end of the week and the USDJPY just below 100,00 there are good chances to return to the long term trend of the dollar’s depreciation.
Stronger dollar usually doesn’t spell good news for the emerging currencies from the Central Europe and this week was no different. The Czech koruna lost as much as 4% to the dollar, not least because the government and the central bank gave hints about initiatives aimed at stopping an appreciation of the currency. The Polish zloty proved more resilient, as the local data on wages and output nearly sealed another interest rate hike. The zloty lost 1,7% to the dollar and gained slightly to the euro.
Przemysław Kwiecień
Chief Economist
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