CEE Exchange Rate Analysis: October 29 – November 2

By : Economics Research Team

Our analysis presents the exchange rates for the region in two forms.


CURRENCY INDEX

First we present them as indices to facilitate comparison across countries. This is done by creating a simple index where each exchange rate is assigned an index value of 100 at the beginning of the week. It is then easy to compare across exchange rates and also any change can be easily considered as a percentage change.


HISTORICAL TRENDS

Second, we present each exchange rate against its own historical trend. In this case we calculate each currency’s three month rolling average value and an upper and lower boundary that is +/- one standard deviation around the average. This allows one to quickly see which currency is outside historical norms.


Finally we report the week’s exchange rate values in a table at the end. All exchange rates are “domestic currency per Euro”.

Currency Index

Source: QU Economics Research Team. Local CEE Countries currencies are denominated in Euro's then indexed to be 100 at the start of the week.

During the week of October 29 – November 2, 2018, the CEE Currency index showed greater volatility than it has in past weeks, mostly driven by the Hungarian Forint (HUF). From Monday (October 29) to Wednesday (October 31) the HUF lost about one percent of its value, shown above by the exchange rate (green line) rising by just over one percent). None of the other currencies changed value by a full percentage point during the week although all but the Romanian leu (yellow) lost value in the early part of the week. The Romanian leu (yellow line) remained virtually unchanged.


Historical Analysis



While the Hungarian Forint/Euro was the only currency to change by one percent during the week (see CURRENCY INDEX above), compared to its historical levels, the one percent rise was actually a return to its historical average. The mid-week increase in exchange rates (loss in currency value) shows in 3 of the 4 exchange rate graphs, suggesting, however that the move was not simply a return to trend for Hungary, but rather a shock in value to the region. The mid-week rise pushed the Czech Koruna/Euro and Polish Zloty/Euro above their historical upper bounds suggesting that the shock was relatively large for these economies as well. The Romanian Leu/Euro rose (i.e., lost value) slightly for the third straight week, but again the movement was gradual.


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