Czech central bank chief: we can fight crown fall

Credit: REUTERS/David W Cerny

The Czech National Bank will not "sit idle" if the crown were to depreciate too much although that is not expected, Governor Jiri Rusnok was quoted on Tuesday as saying.

PRAGUE, Oct 27 (Reuters) - The Czech National Bank will not "sit idle" if the crown were to depreciate too much although that is not expected, Governor Jiri Rusnok was quoted on Tuesday as saying.

"I don't assume that we should be getting to such extreme levels with the crown," Rusnok said when asked in an interview published by daily Mlada Fronta Dnes on Tuesday about whether it was realistic to expect the crown would weaken to a level such as 30 crowns to the euro.

The crown EURCZ= traded at around 27.300 on Monday and has retreated in recent weeks to its lowest levels since May as a resurgence of the coronavirus pandemic forced the return of lockdown-type measures that will hit the economy. The Czech Republic has had one of Europe's highest infection rates.

Rusnok reiterated the bank would react if needed. "Should there be such a threat, we would not sit idle. We have enough firepower to prevent any destructive depreciation of the crown," he said.

The central bank increased its reserves sharply in 2013-2017 when it bought large volumes of euros in order to keep the crown weak through an intervention regime to fight deflationary pressures.

The central bank has forecast an average exchange rate of 26.70 during the fourth quarter of 2020 as part of its regular outlook. It is due to release a quarterly update to the outlook at its next policy meeting on Nov. 5.

(Reporting by Robert Muller; Editing by Susan Fenton)

((robert.muller@thomsonreuters.com; +420 234 721 615; Reuters Messaging: robert.muller.thomsonreuters.com@reuters.net))

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