(Repeats story published late on Wednesday)
By Mirka Krufova
PRAGUE, Nov 19 (Reuters) - The Czech crown is expected to
strengthen 1.4 percent in the next half a year, resuming an
appreciation path after months of weakness, a Reuters poll
showed on Wednesday.
A relatively strong performance by the Czech economy next
year compared to the euro zone and low foreign debt are seen
supporting the koruna.
Fourteen analysts in the poll conducted between Nov 14 and
Nov 18 gave a median forecast for the currency <EURCZK=> to firm
to 25.30 within six months from 25.68 on Wednesday afternoon. By
this time next year, it was forecast to firm by 3.4 percent to
24.80.
Over the next month, the unit should strengthen to 25.50 per
euro.
Turbulence on western financial markets spread to central
Europe over the past weeks, causing an investor flight from
local assets and sparking wild currency swings.
Some analysts said the latest turbulence cost the crown the
safe haven status it had won among the EU ex-communist states in
past years thanks to a fast growth and traditionally low current
account deficits.
But confidence in the currency should be restored as the
central European country, unlike the euro zone, is expected to
maintain growth, catching up with richer west European peers.
"Risk aversion on financial markets went so far in the
middle of October that it was so strong that the hypothesis of
the crown being a safe haven stopped being valid," said David
Marek, an analyst at Patria Finance.
"(But) real convergence will continue. The Czech economy
will increase its output while the euro zone will lower it and
as part of this real convergence our model also shows a nominal
convergence in the form of the crown's exchange rate
appreciation," Marek said.
The crown has been the most stable currency in the region in
the past weeks despite the market turmoil.
It dropped 3.5 percent versus the euro since Oct. 1,
compared to a 12.6 percent plunge of the Polish zloty and a 10.5
percent decline in the Hungarian forint.
"I think that the need for external financing will be
relatively solid, meaning low, in the Czech economy, which will
be one of the fundamentals of a renewed appreciation of the
Czech crown," said Jaromir Sindel, an analyst at Citibank.
"I also think that the Czech central bank, after a series of
rate cuts, will likely return to raising, (which will mean) a
more positive interest rate differential towards the ECB."
The Czech central bank slashed interest rates by 75 basis
points to 2.75 percent on Nov 6, the same day as the euro zone
cut its main benchmark rate by half a percent to 3.25 percent,
widening the interest rate differential by 25 basis points.
For a TABLE with the poll forecast, click on []
(Writing by Jana Mlcochova; Editing by Toby Chopra)
