Analysts: Early election will ot cause wild fluctuations in crown

According to bank analysts, the shifting of the general election from the original September date to an earlier one in June won't cause bigger fluctuations in the Slovak crown's rate over the next few months. The analysts think that the crown should move around the 38-SKK/EUR level in the last few weeks before the early election takes place on June 17. Slovenska sporitelna analyst Maria Feherova, however, thinks that the shortening of the current electoral term will lead to increased volatility in the exchange rate. In addition, the recent positive trend of the crown against its referential currency the euro will be temporarily halted.

According to Maria Valachova from Vseobecna uverova banka, the financial markets have taken a relatively sober view of the agreement by all of Slovakia's parliamentary parties to hold an early general election. "The alternative - a markedly minority Government that would govern until the end of the original term in September - would only extend the pre-election uncertainty," said Valachova. Political uncertainty may influence the crown's rate in the short term. "We expect a return to the strengthening of the crown in the long term, due to Slovakia's positive macro-economic indicators," she added.

According to CSOB dealer Marek Gabris, the 38-SKK/EUR level would be attractive to London investors, who could open new positions in response to such an exchange rate. This would cause increased interest in buying the crown. At the same time, Slovakia's entry into the European Exchange Rate Mechanism ERM-2 last year has provided an anchor for the crown, meaning that it can only move within a certain range against the euro.