InvestCEE: Exchange Rate Report

Week of January 16 – 20, 2023

Welcome to our first regular report on exchange rates in Central Europe.  This revives one of the more popular reports from the old InvestCEE, now rebranded at least in LinkedIN as “InvestCEE: A Global Economics Subsidiary”.  I still have to decide if Global Econ needs its own LinkedIN site or not.

For those of you who don’t know me personally, I try to split my time between the USA and Central Europe, namely Hungary, Romania and Poland.  I founded and run the Central European Institute at Quinnipiac University (www.qu.edu\cei) which has two endowed chairs, one for Poland and one for Hungary. I currently hold the one for Hungary, the Istvan Szechenyi Chair in International Economics.

We will slowly revive the regular InvestCEE reports on exchange rates and interest rates in Central Europe.  And, I hope to have a companion website launched soon with more materials, research and reports.  Over time, I expect to make the deeper material on that site the paid content and hope to keep my personal column on Global Econ either free or the cheapest option (it depends on how Substack allows me to structure subscriptions).  For now it’s all shared with everyone and I welcome your feedback. I will notify everyone in advance before I change any pricing.

Our InvestCEE work will focus on, what I think of as the Visegrad Four plus Romania. That is, the Czech Republic, Hungary, Poland, Slovakia and Romania.  For the exchange rate report, we report all the currencies as “the Euro price of the domestic currency”.  That’s because the majority of their trade and financial flows are in Euros.

Because Slovakia uses the Euro as its currency, it’s not reported here.  Therefore, currently, this report includes graphs of the Czech Koruna (CZK, in blue), Hungarian Forint (HUF, in green), Polish Zloty (PLN, in red) and the Romanian Leu (RON, in yellow). The colors have some logic. The Czech flag has some blue in it, the Hungarian flag has some green, the Polish flag has some red, and the Romanian flag, some yellow, allowing me to pick distinct colors for them all.

This ends my introductory explanation for these reports. You can my column “USD Exchange Rate Report: Mixed Week for the Dollar” for a more in-depth discussion of interpreting these graphs.  Below is a typical, short report.

Thank you, Chris

CEE Currencies Index

Source: Eurostat and own calculations. Exchange rates are inverted to be Euro per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to 100 at the start of the period.

For the week of January 16 – 20, 2023, all the CEE currencies but the Polish Zloty mildly strengthened relative to the Euro. The Czech Koruna (blue) and Romanian Leu (yellow) both strengthened consistently, but neither more than 0.4%.  While the Hungarian Forint (green) strengthened as well, it started the week with a 0.6% drop, regaining ground later in the week.  The Polish Zloty (red) lost value consistently through the week.  And closed about 0.5% down by the week’s end.

CEE Currencies Historical Trends

Source:  Eurostat and own calculations. Exchange rates are inverted to be Euro per local currency (i.e., an increase indicates a stronger domestic currency). The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.

For the week of January 16 – 20, 2023, the Czech Koruna (CZK) and Hungarian Forint (HUF) seem to have continued their overall upward trend since around the beginning of the new year. The Polish Zloty (PLN) does not seem to exhibit any clear strengthening or weakening in recent months, bouncing within its boundaries although generally on the stronger side, between the average and upper bound.  Finally, the Romanian Leu (RON) seems to display the least obvious trend behavior recently, fluctuating above and below it’s “normal” range over the past three months.

We therefore won’t read as much into the weekly movement of the Romanian Leu and the Polish Zloty and view the Hungarian Forint and Czech Koruna as continuing their strengthening trend.