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CURRENCY

Stable for now but watch September

There is one fundamental event which is expected to shake up the Slovak crown(Sk) in 2002 - the parliamentary elections.
Growing privatisation revenues, most of all $3 sale of a 49% stake at SPP gas utility would keep the 2002 range of the Sk against euro, its reference currency, between Sk42 and Sk44 per 1 euro, the same as last year.
However, this might be the case only for the first nine months of 2002, since the parliamentary elections will take place at the end of September.

THERE is one fundamental event which is expected to shake up the Slovak crown(Sk) in 2002 - the parliamentary elections.

Growing privatisation revenues, most of all $3 sale of a 49% stake at SPP gas utility would keep the 2002 range of the Sk against euro, its reference currency, between Sk42 and Sk44 per 1 euro, the same as last year.

However, this might be the case only for the first nine months of 2002, since the parliamentary elections will take place at the end of September.

"With elections, a higher volatility of the crown will come and investors will leave their positions as they would be nervous of the election results," said Róbert Prega, an analyst with Tatra Banka.

"And how the currency will fluctuate after the elections will depend on who will constitute the new government," he added.

In 2002, investors are expected to switch a part of their investments from the US to safer havens such as the European Union. This is the result of low interest rates overseas, something that may have positive effect on the strengthening of the Sk against the American dollar.

The American central bank has several times cut the rates in the aftermath of the September 11, terrorist attacks on New York and Washington and the ongoing American recession.

The rate currently stands at 1.75% while the rate of the European Central Bank is 3%.

"The dollar may stop being super interesting for investors in 2002," said Tomáš Kmeť, an analyst with SLSP bank.

While in 2001, the Sk versus dollar rate ranged between Sk47 and Sk50 per $1, in 2002, Kmeť said that in 2002 the rate may circulate around Sk45 per 1$.

The next year will be significant for the EU, where 60% of all Slovak exports go, because the citizens of 12 EU countries will start using the single currency euro as of January 2002. The euro will replace their national currencies.

But the matter is expected to have little influence on the Slovak crown.

"Trading in euro has been carried out since 1999, so its physical usage is only the technical matter," Kmeť said.

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