Central European Daily

The end of the last week was relatively calm for CEE currencies. The Czech koruna, the Polish zloty as well as the Hungarian forint hovered in narrow ranges around their current levels and sell-offs only hit the Ukrainian hryvnia and the Russian ruble. The ruble weakened to an all-time low against the central bank’s basket and Russia’s central bank unexpectedly raised its key interest rate by 1.5 percentage point to 7% today in early morning in order to regain financial stability. Nevertheless, the possibility that the contagion spreads is not off the table, especially if tensions grew into a bloody conflict. In addition, although the bilateral trade of the Czech Republic, Poland as well as Hungary with Ukraine is only marginal, possible sanctions from European Union against Russia due to violation of international agreement would undoubtedly affect international trade of CEE Europe, especially of Poland. We however do not think sanctions are very likely.