Polish zloty jumps as premier’s party prevails in elections
By William L. Watts and Michael Kitchen, MarketWatch
FRANKFURT (MarketWatch) — The euro rallied against the U.S. dollar Monday after France and Germany vowed to act to safeguard European banks.
The euro EURUSD +1.84% rose to $1.3593, up from $1.3401 in late North American trading Friday. The gains came as German Chancellor Angela Merkel and French President Nicolas Sarkozy said Sunday they’ve reached an agreement to recapitalize beleaguered European banks, though details of the plan won’t be available until later this month. See report on French, German deal to support European banks.
The euro added to gains after Reuters reported that a review team from Greece’s troika of international lenders — the European Union, International Monetary Fund and European Central Bank — were set to conclude talks with Greek officials and release a statement later Monday or Tuesday.
That would likely clear the way for the release of Greece’s next tranche of aid, which is needed by mid-November to avert default.
A rescue plan for troubled European lender Dexia SA BE:DEXB -17.24% also helped to soothe nerves, allowing the euro to gain ground, said Jane Foley, senior currency strategist at Rabobank International in London. Still, a lack of details on bank recapitalization plans and ongoing fears about the region’s banking sector could set the stage for further euro weakness, she said.
“Of far greater concerns for the markets is whether Dexia will prove to be only the first banking causality of the euro-zone crisis and whether the reassurances of the political leaders to stand behind their banks will be enough to see the sector through the next few months,” she said.
The European currency had taken a wild ride on Friday, rising above $1.35 after a better-than-expected U.S. employment report eased global-growth concerns but then falling below $1.34 after Fitch Ratings downgraded the sovereign debt of Italy and Spain. See report on Friday’s forex moves.
The Polish zloty jumped versus both the euro and the dollar after Prime Minister Donald Tusk’s ruling coalition won Sunday’s election.
With nearly all votes counted, Tusk’s centrist Civic Platform won 39.2% of the vote, with main rival Jaroslaw Kaczynski’s conservative Law and Justice party winning 29.9%, the Associated Press reported. Tusk’s preferred coalition partner, the Polish People’s Party, won 8.4%, AP reported.
“Overall, the outcome of the elections is good news for investors as pro-market policies are likely to be continued and there should be a solid parliamentarian majority for fiscal reforms,” said Lars Christensen, chief analyst at Danske Bank in Copenhagen.
The euro EURPLN -1.49% fetched 4.3153 zloty in recent trade, a fall of 1.3%. The broadly-lower U.S. unit USDPLN -3.26% declined 2.7% to trade at 3.1797 zloty.
The dollar index DXY -1.20% — which tracks the performance the greenback against a trade-weighted basket of six other major currencies — slipped to 77.834 from 78.660 late Friday.
Among other major currency pairs, the Japanese yen ticked higher, with the dollar USDJPY -0.22% slipping to ¥76.67 from ¥76.90 at the end of the previous week, with Japanese financial markets closed for Sports Day.
The British pound GBPUSD +0.58% added to its Friday gains, changing hands at $1.5647 compared to $1.5563 late Friday.
William L. Watts is a reporter for MarketWatch in Frankfurt.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
