During the week of November 26 to December 2, the Slovak money and foreign exchange market experienced its most stable development since the crown was floated in early October.
Slovak crown interest rates moved slightly higher as the long end of the yield curve rose by 1.0%. This move was the same as the bid/offer spread quoted on the money market. The central bank controlled the cumulative volume of funds in the sector and refinanced the market through 2-week repo-tenders organised on an irregular basis according to market needs. The yields accepted were between 9.3 and 11.2%, as short-term interest rates are more volatile.
More attention was paid to the auction of 91-day T-bills organised on December 2. Volumes and yields similar to the same auction organised one week prior, and the yields accepted were between 16.0 and 16.88% with an average yield of nearly 16.5%. More then 3.4 billion crowns were accepted out of a total demand reaching 8.9 billion. As there was still very high demand at this auction, interest rates will probably move slightly lower during the next weeks.
The Slovak crown foreign exchange rate stood in very narrow range as low activity and thin volumes did not move the market in either direction. The crown's basket index hovered between 10.4 and 10.75% on the week side during the covered period. The crown was at its weakest level on November 30, as customer purchases of foreign exchange for crowns led over purchases of crowns.
The crown did not react to weak numbers announced by the Slovak Statistical Bureau during the week. The Slovak end-November budget deficit rose to 12.881 billion crowns, and the foreign exchange deficit for the January-October period rose to 65.883 billion crowns versus 55.040 billion in January to September.
Some dealers are expecting higher demand for hard currencies at the end of the year. But on the other hand, the situation compared to last years has changed, as we have another currency regime. Some dealers see the crown at stronger levels and considering the market to be long hard currencies, as there was no reaction to the latest negative numbers and the expected year-end closings.
7. Dec 1998 at 0:00 | Roman Petransky