Barometr of Industry: Czech export hedging keeps falling

Prague, Oct 20 (CTK) - Currency hedging by Czech exporters continues to fall, with 29.8 percent of export being protected qtr/qtr and 25.7 percent in annual terms, said a survey which was conducted by the Confederation of Industry of the Czech Republic and the Czech National Bank (CNB).

The CNB's weak crown policy is behind the low level of export hedging, the Confederation said. "I am expecting that exporters would hedge (against currency fluctuations) to a greater extent before the end of the exchange rate commitment, which is in the first half of next year," said Radek Spicar, the vicepresident of the Confederation.

Today, CNB governor Jiri Rusnok said that the central bank might quit the forex intervention regime, which is aimed at keeping the crown at weak levels, under certain conditions as long as 2018. However, the most likely scenario is that the CNB will discontinue its exchange rate commitment in the second quarter of 2017, Rusnok said.

He reiterated that he is not worried about a strong appreciation of the currency after the CNB quits the intervention regime. Should it happen, the central bank would "ease" the impacts of such movements, he said.

The Confederation pointed out that firms are increasingly using alternative ways of hedging against currency risks. Companies in the car industry, and recently also businesses in other sectors, are making mutual transactions in euros, Spicar said.

The survey showed that the share of payments in euros to suppliers was roughly 19 percent on the domestic market in the second quarter.

Source: ČTK