The zloty started the week from a slight depreciation – a profit taking from previous week. That didn’t last long though – as soon as Tuesday the EURPLN pair was back below the 4,0 mark and on Wednesday it recorded a weekly minimum at 3,9660. That was just a notch above the 3,9540 recorded on the 3^rd of February which in turn was the lowest since January 2009. The performance of the Polish currency stood in a sharp contrast with the WSE indices which for some unknown reason underperformed badly against the S&P500 and even the DAX30.

Fed’s stunning and surprising decision to increase an interest on otherwise dead discount window a moderate impact on the Polish zloty. If the decision heralded an actual monetary tightening it could prove very harmful. Yet numerous dovish from Fed officials combined with after the US inflation data convinced the markets that the risk of real tightening is still remote. That helped the Polish currency to stick to 4,0 zloties per euro despite a further depreciation of euro against the dollar.

The US monetary policy is likely to dominate the market for a while, especially as investors await Bernanke’s testimonies. If the Fed really doesn’t aim at tighter monetary conditions, Mr. Bernanke will need to articulate it better than ever to convince suspicious investors. If he can do that, stock markets are bound to continue to recover and the zloty will strengthen along the way.

Przemysław Kwiecień Chief Economist

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