Slovak crown enjoys more stable year

It has been a good year for the Slovak crown. With an improved currency rating, no massive turbulence and only three interventions by the National Bank of Slovakia (NBS), the crown became more attractive for investors.
Over the year, the crown ranged between Sk42.00 - Sk44.00 to the euro, its reference currency, and between Sk45.60 - Sk51.05 against the strong American dollar.
By comparison, the crown was over 48 to the dollar at the end of 2000, about 42 in December 1999 and 36 at the end of 1998.

It has been a good year for the Slovak crown. With an improved currency rating, no massive turbulence and only three interventions by the National Bank of Slovakia (NBS), the crown became more attractive for investors.

Over the year, the crown ranged between Sk42.00 - Sk44.00 to the euro, its reference currency, and between Sk45.60 - Sk51.05 against the strong American dollar.

By comparison, the crown was over 48 to the dollar at the end of 2000, about 42 in December 1999 and 36 at the end of 1998.

The central bank made only three interventions against a weakening crown in 2001, all in January when the rate threatened to break Sk44.00 to the euro.

The Sk44.00 rate is what foreign exchange (forex) traders refer to a 'psychological barrier', meaning it is perceived as a significant standard that the NBS has to defend by buying crowns to reduce the supply of the currency on the market, and thus help the crown strengthen.

The most significant strengthening by the currency was driven by domestic politics at the end of May after Deputy Prime Minister for Economy Ivan Mikloš survived a non-confidence vote in parliament. Foreign investors and financial institutions consider Mikloš the guarantor of economic reform.

Investors and domestic banks started buying the currency at Sk43.25 per euro and drove the exchange rate down to Sk42.80, the strongest figure since December 2000.

The crown reached its weakest rate against the dollar (Sk51.05) in June at the peak of American economic growth figures.

On the other hand, a stable domestic economy and expectations of a positive rating by prestigious financial institutions pushed the Slovak currency to its strongest rate of Sk41.88 per euro at the beginning of July.

However, a few days later gloomy regional market sentiment weakened the currency by Sk0.60 after Leszek Miller, the Polish candidate for the post of Prime Minister, said his country was on the verge of financial crisis. The comment affected neighbouring forex markets, including Slovakia.

The crown continued to weaken after the September 11 terrorist attacks on New York and Washington when the rate moved from Sk43.25 to a nine-month high of Sk43.90 per euro after investors pulled out of riskier markets in transforming countries such as Slovakia.

However, due to the US recession in the aftermath of the attack, the crown later strengthened against the American dollar, moving from Sk48.20 to Sk46.90 six days after the event.

The currency received a boost after the Standard & Poor's ratings agency raised Slovakia's currency rating to A minus in October. After Moody's rating agency followed Standard & Poor's lead and investors began to buy the crown, the rate dropped to Sk42.65 per euro.

On December 19, the Slovak crown reached its weakest ever rate of Sk1.35 against the Czech crown after the Czech Republic attracted a significant number of foreign investors whose investments strengthened the currency.

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