Over the past three weeks, the złoty has strengthened against the euro by almost 7 percent. The last week in particular gave cause for optimism regarding the Polish currency in 2012. An important piece of good news for the złoty was the decision by the US Federal Reserve to hold interest rates in that country at 0-0.25 percent until the end of 2014.

The Fed also lowered its GDP projections for US growth in 2012, which the markets view as a possible precursor to more quantitative easing in the US.

Source: Stooq.com

The Polish currency was also helped by comments from National Bank of Poland president Marek Belka, who said the bank is concerned about inflation and is prepared to hold interest rates at over 4 percent.

Headline inflation came in at 4.8 percent in November 2011 and fell to 4.6 percent in December – still well above the bank’s 2.5 percent target.

Partly on the back of this, and news from the US, the złoty strengthened to around zł.4.25 to the euro, zł.3.24 to the dollar and zł.3.52 to the Swiss franc last Friday.

But Przemysław Kwiecień, chief economist at X-Trade Brokers, thinks better-than-expected data from Europe probably played a bigger role. “Purchasing Managers Index readings for France and Germany showed that after a weak autumn, the beginning of the year looks more hopeful.”

“In the last few weeks, the appreciation of the euro has come with the reduction in credit risk and it seems that some investors now consider Europe’s problems to be over. But there was a similar mechanism in October until it quickly turned out that the optimism was misplaced – and that situation could repeat itself again,” stated Mr Kwiecień.