FOREX MARKETS

T-bill yields set mark for 3-month rates

The Slovak foreign exchange and money market is enjoying a period of extended calm aided by low interest of customers and market participants. The crown floated between minus 10.3 and 10.7%, but remained stable as the German mark/Slovak crown cross moved in the range of 21.540-680 within the covered period.
The DEM/SKK exchange rate started to be more monitored as the index of the past basket, and the dollar/mark moves did not have impact on the mark/crown exchange rate. So the level of 21.400 can now be defined as the first support for the mark/crown exchange rate and the level of 21.650 as the first resist.
The market saw central bank officials accepting "the current trend in the Slovak crown's exchange regime" and quoting as positive the fact that "there have been no extreme fluctuations since the abolition of the fluctuation range".

The Slovak foreign exchange and money market is enjoying a period of extended calm aided by low interest of customers and market participants. The crown floated between minus 10.3 and 10.7%, but remained stable as the German mark/Slovak crown cross moved in the range of 21.540-680 within the covered period.

The DEM/SKK exchange rate started to be more monitored as the index of the past basket, and the dollar/mark moves did not have impact on the mark/crown exchange rate. So the level of 21.400 can now be defined as the first support for the mark/crown exchange rate and the level of 21.650 as the first resist.

The market saw central bank officials accepting "the current trend in the Slovak crown's exchange regime" and quoting as positive the fact that "there have been no extreme fluctuations since the abolition of the fluctuation range".

On the money market, one-to-six months interest rates recorded a minor increase and stood at 13.68/14.98 for one-month tenures, 16.65/18.08 for the three months and 17.23/18.72 for six months. The central bank has been adding liquidity through refinancing repos by rolling them over as they expire, and as everybody believes that the central bank will do the same in the future, interest rates should stay at the same levels.

Some dealers have faith that the National Bank will add liquidity regularly. Regular repos could help interest rates to stabilise and the yield curve to flatten out. The average yield in the auction of 91-day T-bills reached 16.611%, nearly the same as in the previous similar auction one week ago. The finance ministry's money market policies appear to be reasonably transparent, so the last auctions of T-bills can be considered as setting a benchmark for three month interest rates.

The country's fundamentals remain weak, but the new government's plans to privatise banks, revive the enterprise sector, achieve a balanced budget by the end of its four-year term and deregulate prices have already been good signs. The market does not expect any significant or sharp moves during the last days of this year.

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