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Czech Republic stops capping the value of its currency

Associated Press logo Associated Press 6/04/2017

PRAGUE — The Czech Republic's central bank says it has decided to stop intervening in foreign exchange markets to limit the rise in the national currency, the koruna, against the euro.

The bank had been since November 2013 selling korunas to stabilize its value against the euro at around 27 koruna ($1.06).

The decision to cap the koruna's value had been prompted by concern of low inflation. But inflation has risen recently, hitting 2.5 percent in February, above the bank's long term target of 2 percent.

A weaker currency tends to boost inflation by increasing the cost of imports. At the same time, it also helps exports.

The central bank has indicated it would stop the practice in the second quarter of 2017, or in the middle of the year.

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