21st March 2005
Thursday, September 2nd, 2010
Escape from Poland
Last week strongly hit the Polish currency. Charts showed only one direction - North.
Monday morning EUR/PLN was trading in the FX interbank market at 3.9475, USD/PLN at 2.9340. On Thursday afternoon one euro was worth more than 4.14 and dollar investors paid almost 3.09. On Friday the z這ty gained a bit as foreign hedge funds, which led the currency's recent slump, reappeared in the wake of economic data suggesting Poland is near sharp interest rate cuts.
Poland's z這ty fell sharply and hit a three-month low 4.14 level on Thursday as foreign investors continued a sell-off of emerging market assets. The z這ty was the strongest Eastern European currency in 2004 and was thus weakest in last week's sell-off.
There are another two negative factors for the z這ty. Firstly, there was political uncertainty over when and what the next government will be and how stable it will be. The second is that the market has already priced in most of the positive information about the Polish economy.
The last factor keeping the z這ty strong is the steady demand for Polish bonds, but that now looks like a field for speculators. We noticed this situation on Friday when foreign investors returned to buy currency debt both before and after the data, pushing debt yields around 10 basis points lower and the z這ty up by more than 1 percent against both major currencies (the dollar and euro).
Inflation data released last week suggests there is room for deeper interest rate cuts. Polish central bank council member Andrzej Wojtyna said that the balance of inflation risks favored monetary easing and that the bank would discuss the scale and timing of rate cuts this month. The market expects a 50 bp cut at the meeting of the Monetary Policy Council after Easter dropping the base rate from 6.5% to 6.0%.
Marcin Golik, Warsaw Investment Group (WGI)
From Warsaw Business Journal
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