Koruna Volatility Shows Danger Zone for Cap Exit Over Next Month
- Bets on price swings jump between one-week and one-month tenor
- Czech central bank has it could re-float koruna at any time
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Currency options are giving an insight into investors’ expectations for the end of the Czech central bank’s cap on koruna gains.
The implied-volatility curve for the euro-koruna pair shows a steep jump between one-week and one-month tenors, indicating heightened concerns of greater price fluctuations between those two dates. While that time frame also includes the first round of voting in the French election, it’s in line with a Bloomberg survey that shows 13 out of 22 analysts predicting the intervention regime that limits appreciation at 27 koruna per euro will end in April or at the May 4 monetary policy meeting.