Czech crown will strengthen in the next 12 months

FCHAIN Czechia office informs: A falling year-on-year inflation rate and higher investor confidence are improving the crown’s value, despite lower interest rates.

The Czech crown is expected to strengthen against the euro over the next year. Amid higher investor confidence, the survey projects that the crown will rise from its current exchange rate of about EUR 1: CZK 25.2 to CZK 24.6 within 12 months. This anticipated appreciation comes amid mixed forecasts for Central European currencies, with the Polish zloty expected to strengthen and Hungarian forint projected to weaken against the euro.

The Czech currency experienced its weakest levels in over two years in early August, at one point exceeding CZK 25.5 per euro. This decline was influenced by domestic economic data and comments from Czech National Bank (CNB) vice-governor Jan Frait, which cast doubt on the outlook for interest rates. Despite global financial market volatility, the crown has recently stabilized, despite the CNB’s recent interest rate cut. Falling inflation has also improved the crown’s outlook.

EXPATS EXPLAIN

Factors that can contribute to a strong national currency include a stable and growing economy, a high demand for exports, a strong central bank with effective monetary policies, strong foreign-exchange reserves, current-account surpluses, political stability, low inflation rates, attractive interest rates, and a high level of confidence and trust in the currency by both domestic and international investors.

So far in 2024, the crown has weakened by approximately 2.5 percent against the euro since January, with the Hungarian forint experiencing a larger decline of 4.2 percent. In contrast, the Polish zloty has gained roughly 0.4 percent against the euro during the same period.