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06.11.2009 - Zloty flat on the week as global markets recover

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Date: 2009-11-06 22:00

The Polish Zloty did was roughly flat in the first week of November and that could be interpreted more as a weakness of the currency rather than a status quo. While the zloty managed to escape a depreciation (on Monday the EURPLN pair hit 4,32 – three months high), it didn’t benefit on the improved conditions on the global markets. Despite weaker than expected labor market data, both EURUSD and major stock indices went clearly up, partly on accommodative stance presented by the Fed. This helped the Zloty to recover previous losses but nothing more than that.


Two things are worth noticing here. First of all, there is no widespread rush towards exotic currencies anymore and investors are becoming picky. Against this background the Zloty does not look very attractive at the moment. While the economy is doing relatively well, some market participants might fret that the Polish government is not quite  determined to stick to a fiscal discipline. After presenting plans of large budget deficit for the next year, the government is presenting worrying ideas for dodging 55% debt to GDP ratio currently restricting additional borrowing by the Polish law. The last week (closing around 2,86 on the USDPLN and 4,25 on the EURPLN) pointed at the currencies preferred by the market like Brazilian Real (despite a recent tax on capital inflows) or South African Rand. Czech’s Koruna is an exception – the currency covered losses taken before.

Przemysław Kwiecień
Chief Economist