Crown still very strong

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The Czech crown continued strengthening to record highs last week and on Thursday broke the psychological level of 30 crowns per euro, setting a new record high at 29.9 crowns to the euro. The Central Bank intervened against the currency, sending it back to over 30 crowns. Some experts say the crown could reach as high as 29.50 over the next few days unless the Central Bank intervenes again. Finance Minister Jiri Rusnok said that intervention was justified because the rate of the crown's strengthening does not correspond to economic development.

The Czech crown continued strengthening to record highs last week and on Thursday broke the psychological level of 30 crowns per euro, setting a new record high at 29.9 crowns to the euro. The Central Bank intervened against the currency, sending it back to over 30 crowns. Some experts say the crown could reach as high as 29.50 over the next few days unless the Central Bank intervenes again. Finance Minister Jiri Rusnok said that intervention was justified because the rate of the crown's strengthening does not correspond to economic development.

Czech National Bank Governor Zdenek Tuma agrees that there's no real justification for the strengthening of the Czech crown and warns that it could endanger the country's macroeconomic stability. According to the business daily Hospodarske noviny, the central bank now faces growing pressure from Czech exporters to intervene more heavily, but the paper quoted one analyst as saying that the trend towards a strong crown is now so dominant that exporters are just going to have to learn to live with it."

Meanwhile, the Czech business news server Patria Online reported that Jan Svejnar, Professor at University of Michigan, has produced an original solution for the Czech crown issue. Unless the Czech Republic succeeds in pressing the crown down, it would be possible to start thinking about substituting it with the euro. As an example, Patria Online quotes Svejnar as saying that 35 CZK could be substituted with 1 euro. However, it notes that Czech politicians and economists do not think it is the right time for such a big change at the moment.