Signs of recovery – Commerzbank

All three CE3 coins have seen sharp declines during the risk-on movement in recent weeks. The most volatile of these – the Hungarian forint – breached the key 400 level against the euro, while the Polish zloty rose from around 4.27 a week ago to 4.31 at the end of last week. All three currencies now appear to be stabilizing, or even recovering, as the risk peak fades – EUR/HUF dropped below 400 – a significant indication that the risk peak may be fading was the renewed price decline oil, Commerzbank’s FX analyst. notes Tatha Ghose.

Koruna has the lowest beta among CE3 coins

“Today, we take a look from the point of view of the Czech crown. The crown has the lowest beta of the CE3 coins and therefore can be expected to fall the least following a common market decline. We see in the left figure below that this was indeed the case – the crown fell the least. At the same time, the chart confirms the correlated nature of the movement in general. This also means that the crown is likely to recover at least as the market continues to rise.”

Another interesting analysis agrees with this conclusion. In the right-hand figure below, we represent a rolling beta for the EUR/CZK exchange rate. The indicator measures the proportion of variation in the EUR/CZK exchange rate that can be explained by a regression against a basket of peers. This calculation is performed using a rolling window, which therefore produces the represented indicator and not just a static number.”

“During major global developments, such as post-covid in 2020, the indicator has naturally risen to high levels. This indicator has increased recently, but not to the high levels seen during major uprisings. For the crown, it is only around 0.2, which represents a slight sensitivity to global forces. This is good news from a risk perspective. On the one hand, this limits the crown’s advantage in case of continuous recovery. We expect EUR/CZK to gradually return to the 25.15 level in the coming quarter.”