The anticipated corrective movement on the złoty finally materialized last week. Markets started off the week continuing the previous weeks’ trend, with the złoty reaching weekly lows at zł.4.15 against the euro and zł.3.12 against the dollar. One of the drivers of those moves was the EUR/USD, which climbed to a three-month high of $1.33 decreasing risk aversion.

Hopes for a further appreciation of the złoty arose after the National Bank of Poland’s Monetary Policy Council (RPP) kept interest rates unchanged at 4.5 percent, but at the same time warned that high inflation (which has remained above 4 percent) could result in an interest-rate hike.

However, the situation changed mid-week when Greece was told to meet additional restrictions in order to receive a second round of financial aid.

The factor that sped up the złoty’s depreciation last week was Friday’s statement by George Karatzaferis, leader of the Greek right-wing party LAOS, who said that he could not vote in favor of the new rescue plan. The LAOS party has only 15 seats out of the total 300 in the Greek parliament (which means it cannot block the new plan by itself), but the markets reacted nervously, with the EUR/USD declining rapidly to $1.32.

Emerging markets currencies reacted even more strongly – the EUR/PLN climbed all the way to zł.4.21, the USD/PLN advanced to zł.3.19 while the CHF/PLN rose to zł.3.48.

Adam Narczewski, X-Trade Brokers DM SA