The Czech crown gains against the euro and the dollar

For the past two weeks, the Czech crown has been trading at a record high against two major world currencies, the euro and the US dollar. The increasing value of the crown affects not only businesses, but also consumers, especially now, as citizens are flooding shopping centers looking for holiday bargains.

Finance Minister Bohuslav Sobotka

Today the Czech crown trades at about 21 to the dollar. In June a dollar bought more than 22 crowns, so the currency has increased about five percent in value. Against the euro too, the crown is gaining ground. Economist Tomas Vlk at Patria Finance says one effect this Christmas season could be stong sales of video games, home electronics, and gasoline.

"When the dollar is cheaper, electronics are cheaper, oil and oil products are cheaper, so it's quite important for some sectors of the economy. Cheaper oil and gasoline is better for the economy because cheaper gasoline enhances the growth."

Economists say the crown's recent strong showing has much to do with decisions made by the US and European central banks. Nevertheless, any boost the Czech economy will likely further increase the value of the crown. It's already humming compared with the US and Eurozone economies.

"The Czech economy has pretty high growth. The growth of Czech economy should be about six percent this year and there will be only slight slowing of the economy next year. So the performance will be better than the Eurozone and the United States."

Hospodarske noviny reports today that Slovakia may meet conditions for joining the euro in 2009, raising the specter that the Czech Republic's old partner may join the European currency first.

"Yes I think it's quite realistic because the Slovaks made a lot of reforms that we are already waiting in the Czech republic. I think the overall health of the Slovak economy is better than the Czech."

Like the Czech crown, the Slovak crown, and also the Polish and Hungarian currencies, have recently shot up in value against the euro and the dollar.

Tomas Vlk says if you're sitting on a lot of euros or dollars, waiting for the crown to go back down, you could be waiting for a while.

"The crown will stay high against the dollar in the long term because the Czech crown firms against the euro and the dollar in the long term thanks to the good performance of the Czech economy. For example, we have target for the Czech crown against the US dollar at the end of next year 20.8 crowns, so this is a long term phenomenon."