HRK/EUR - Appreciatory Pressures Limited

The kuna has held up well against the euro so far in 2010 with the latter struggling on the back of the Greek sovereign debt crisis. Going forward, with the summer tourism season approaching, we expect appreciatory pressures on the kuna to pick up. That said, short-term appreciation will be modest given that tourism receipts and goods exports are likely to underperform 2008 levels, primarily on the back of our forecast for a weak economic recovery in the eurozone. We forecast the kuna peaking at HRK7.1600/EUR in Q310 before beginning to depreciate towards the end of the year.

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