Belka shakes the markets as dollar makes investors cautious
The złoty was under political pressure after Prime Minister Marek Belka declared that a "significant political statement" would be announced on Thursday. Markets speculated about his resignation from the post or at least a change in party membership from the governing left-wing SLD to new political player, the Democratic Party (PD).
On Monday the złoty hit a fresh 32-month high against euro (zł.3.87), but quickly relinquished ground because of the political uncertainty. The dollar was traded near the important zł.3 mark, reaching zł.2.97 on Thursday.
Indeed, the most important day of the week was Thursday when Polish PM Marek Belka made his testimony. He vowed to push for early elections (on June 19) and suggested that the lower house should vote on a motion to dissolve itself on May 5.
Finance Minister Mirosław Gronicki suggested on Wednesday that PPI inflation may start to fall from April 2005 on. PPI rose 4.4 percent yoy in January and was unchanged yoy from the previous month.
The FX market reacted nervously to these political events and the złoty headed south, losing almost five groszy against the euro and three groszy against three dollar. But a few hours later investors focused back on Poland's economic fundamentals and the bulls again were in the majority. By the end of the week in foreign-exchange markets E1 was worth zł.3.91 and $1 was worth zł.2.96.
The greenback sharply returned below zł.3 at the end of the week, though leaving investors more cautious. The złoty's strong upward trend could have significant problems in its continuation in the coming weeks. Investments in any emerging market are never a one-way bet and the last significant correction in the złoty was seen three months ago.
Marcin Golik, Warsaw Investment Group (WGI)
On Monday the złoty hit a fresh 32-month high against euro (zł.3.87), but quickly relinquished ground because of the political uncertainty. The dollar was traded near the important zł.3 mark, reaching zł.2.97 on Thursday.
Indeed, the most important day of the week was Thursday when Polish PM Marek Belka made his testimony. He vowed to push for early elections (on June 19) and suggested that the lower house should vote on a motion to dissolve itself on May 5.
Finance Minister Mirosław Gronicki suggested on Wednesday that PPI inflation may start to fall from April 2005 on. PPI rose 4.4 percent yoy in January and was unchanged yoy from the previous month.
The FX market reacted nervously to these political events and the złoty headed south, losing almost five groszy against the euro and three groszy against three dollar. But a few hours later investors focused back on Poland's economic fundamentals and the bulls again were in the majority. By the end of the week in foreign-exchange markets E1 was worth zł.3.91 and $1 was worth zł.2.96.
The greenback sharply returned below zł.3 at the end of the week, though leaving investors more cautious. The złoty's strong upward trend could have significant problems in its continuation in the coming weeks. Investments in any emerging market are never a one-way bet and the last significant correction in the złoty was seen three months ago.
Marcin Golik, Warsaw Investment Group (WGI)
