PRAGUE: The Czech central bank ditched its cap on the crown, sending the currency sharply higher as investors who have bet billions of euros on it strengthening traded it freely for the first time since 2013.
The decision came as the bank’s board met for a weekly non-ratesetting meeting, its first scheduled opportunity to scrap the weak crown policy since a promise to leave it in place until the end of March expired. The upper limit of 27 for the crown’s exchange rate to the euro was the cornerstone of the central bank’s (CNB) ultra-loose policy programme to revive inflation, and the Czech currency has been pushing at that cap since mid-2015.
The crown duly rose after it was lifted, but the gain of 1.7 per cent to 26.575 to the euro was relatively muted — a sharp contrast to the chaotic few minutes of trading that followed the Swiss National Bank’ unexpected removal of the franc’s cap against the euro in early 2015.
That reflected groundwork the CNB had laid, after inflation has returned to the bank’s 2 per cent target in February. It signalled last week at a regular policy meeting that the cap was near an end. — Reuters
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