BLBG:Polish Central Bank Said to Sell Euros in Currency Market, Zloty Rebounds
Poland’s central bank sold euros on the market for the first time in seven weeks as the zloty hit a two-month low, according to dealers from three commercial banks in Warsaw with direct knowledge of the transactions.
The currency resumed its decline, falling 0.4 percent to 4.4784 per euro at 11:33 a.m. in Warsaw, the weakest level since Sept. 23 and below the rate at which the central bank stepped into the market today. It had initially strengthened as much as 0.4 percent to 4.4416 per euro.
The zloty has lost 11 percent against the euro since the end of June, the third-worst performance among emerging-market currencies after Hungary’s forint and the South African rand, on concern growth in the European Union’s largest eastern economy will slow because of the euro zone’s debt crisis. Central bank Governor Marek Belka said the weakening zloty is making it harder to curb inflation, according to comments on the bank’s website published today, before the currency sales.
“It looks like the Polish central bank will be using interventions and not interest rates to support the zloty,” Rafal Benecki, senior economist at ING Bank Slaski SA in Warsaw, said by phone.
The dealers involved in the transactions asked not to be identified because the information wasn’t public. The Polish central bank’s press office declined any immediate comment when contacted by phone.
Foreign Debt
The National Bank of Poland sold foreign currency on the market three times between Sept. 23 and Oct. 3 in its first operations to support the zloty since the currency was floated in 2000, according to the central bank.
The government also stepped in to defend the zloty by selling euros and dollars over the past three months through the state-owned Bank Gospodarstwa Krajowego, according to Warsaw- based traders involved in the transactions.
The Finance Ministry has defended the exchange rate partly because depreciation increases the zloty value of its debt, with 29 percent denominated in foreign currencies. Public borrowing rose to 52.8 percent of gross domestic product in 2010 and an increase above 55 percent would trigger compulsory spending cuts and tax increases under public-finance laws.
The zloty weakened after reports today showed a decline in manufacturing output in the euro area, which accounts for 54 percent of Poland’s exports.
“A weaker zloty makes it harder to curb inflation,” Belka said in comments on the bank’s website. “That is one of the main reasons we intervened on the currency market.”
To contact the reporters on this story: David McQuaid in Warsaw at dmcquaid1@bloomberg.net; Monika Rozlal in Warsaw at mrozlal@bloomberg.net
To contact the editor responsible for this story: David McQuaid at dmcquaid1@bloomberg.net
