The disparities between the EU8 Eastern Europe economies couldn't be greater at this moment. Latvia badly needs to raise, and basically can't, while the Czech Republic needs to lower, but can't really either:
The Czech koruna fell for a sixth day as speculation the central bank will keep interest rates unchanged at the lowest in the European Union this week attracted carry-trade investors.
The Czech koruna, used by investors as a funding currency for investments in higher-yielding assets elsewhere, slid to a 15-month low against the euro. The Czech benchmark rate is now at 2.75 percent after a quarter-point boost last month and will probably be kept on hold at the central bank's meeting on June 28, according to a Bloomberg survey of economists.
``No rate change should be negative for the koruna as it will leave it exposed to the carry trade, which could create the momentum to test the area of 29.0 per euro again,'' said Elisabeth Gruie, currency strategist at BNP Paribas SA in London.
Meanwhile "The Australian and New Zealand dollars rose to the highest in around two decades on speculation investors were attracted to the yield advantage of the countries' bonds over U.S. debt" while Brazil has a sizeable consumer boom on the back of inflows, and in Vietnam the government tries to steer the Dong steadily down.
Something pretty new is basically at work here, and in country after country traditional monetary policy instruments find themselves frustrated. Getting to grips with the underlying structural dynamics of what is happening represents a major challenge for us all.
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