By: The Quinnipiac University Economics Research Team, Niamh Savage
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 be 100 at the start of the period.
For the period of June 24th through July 6th, the dominant trend for the central eastern European exchange rate index was that most countries saw their rates rise, stabilize, and then decrease towards the beginning of July. All countries but Romania saw strengthening in their currency compared to the Euro. Czechia saw the biggest initial increase with their exchange rates increasing by nearly 7% in only 3 days. Hungary and Poland saw a similar increase after the first or second day of the period, although their movements were less pronounced. Clearly in this group, the dynamics for Romania looked different from the rest suggesting country-specific factors driving the Romanian Leu.
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.
During this time period, the Czech Koruna, Polish Zloty, and Romanian Leu ended outside of their historical range. The Czech Koruna began in the upper end of its historical range, and it increased beyond the county’s upper boundary. The exchange rates for the Polish Zloty began, and remained, beyond their countries’ upper boundaries. The Romanian Leu began and ended above their upper boundary, however it decreased within the time period to its upper historical boundary. The large and persistent increases, as they continue to persist, may have an effect on the trade balances of these countries as their products become relatively more expensive in world markets.
Finally, when viewed relative to their historical trends, while Romania’s exchange rate changes over the last week look unique, the broader trend is common to the region. That is, all currencies today are above their historical averages except for Hungary which is the only one still below it’s own historic mean, making the Hungarian Forint more the outlier than the Leu.