East European Currencies: Slovak Koruna Rises on Fico Comments

By Yon Pulkrabek

June 30 (Bloomberg) -- Slovakia's koruna rose against the euro for a second day after Prime Minister Robert Fico said he would ``welcome'' a switch to the single currency at a stronger rate. The Turkish lira advanced as economic growth beat forecasts.

The koruna also climbed versus the dollar after Fico, speaking in a Slovak Radio interview on June 28, said he would like the koruna to be converted to a higher rate when the nation adopts the euro next year. It's currently pegged at a so-called central rate of 30.126 per euro.

``The market's natural inclination is to sell euros if it's going to be lower'' than the central rate, said Lucy Bethell, an emerging-markets currency strategist at Royal Bank of Scotland Group Plc in London, who forecasts the currency will be converted at 30 per euro. ``It makes sense if it's a round number.''

The koruna climbed as much as 0.6 percent to 30.142 per euro and was at 30.227 at 4:40 p.m. in Bratislava, its biggest gain since May 29. It rose more than 11 percent against the euro in the first half, making it the best performer among the 26 emerging-market currencies tracked by Bloomberg.

Slovakia is due to adopt the euro Jan. 1. As part of the Exchange Rate Mechanism II, the regime designed to check a currency's stability before euro adoption, the koruna can move plus or minus 15 percent against the common currency from its central peg. The country has revalued the peg twice, the last time lifting it by 15 percent on May 28.

Fico reiterated on June 16 that the government wants to have as strong a conversion rate as possible, the Bratislava- based Hospodarske Noviny reported at the time. The final decision on the conversion rate will be made on July 8.

The koruna was bolstered as Slovakia's economy grew 14.3 percent in the fourth quarter, the most in the European Union, and 8.7 percent in the first three months of this year.

Turkish Growth

In other trading, the Turkish lira snapped two days of losses against the dollar after a report showed the economy grew more than expected. The lira gained 0.2 percent to 1.2264 per dollar, from 1.2284 on June 27.

Turkish economic growth accelerated to 6.6 percent in the first quarter, from 3.4 percent in the previous three-month period, the state statistics office in Ankara said on its Web site today. Economists forecast growth of 5 percent, according to the median of 15 estimates in a Bloomberg survey.

The Hungarian forint gained for a second day, to 235.51 per euro, from 237.13. The Czech koruna snapped a two-day gain, slipping to 23.899 per euro, from 23.847 last week.

The Romanian leu rose 0.1 percent to 3.6466 per euro, while the Polish zloty added 0.2 percent to 3.3509 per euro.

To contact the reporters on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net