Currency report: Deeper and down for złoty

The EUR/PLN and USD/PLN peaked on Friday when Polish Prime Minister Kazimierz Marcinkiewicz dismissed Finance Minister Zyta Gilowska, because of allegations that she failed to reveal her ties with the secret police in the communist era. Gilowska will be replaced by Paweł Wojciechowski. The EUR/PLN reached 11-month highs this time, at zł.4.135, and the US dollar hit zł.3.30.

In the long term, the złoty should be supported by strong economic data. Industrial output surged 19.1 percent year-on-year in May, retail sales rose 13.7 percent and the unemployment rate eased to 16.5 percent. In the short term, increasing borrowing costs, and political uncertainty could weaken the złoty further.

Standard & Poor's downgraded the rating of Hungary last week, what caused a sell-off of the forint. On Wednesday, the Slovak central bank had to step in and buy the crown to halt a slide in the currency because of problems with forming a new parliamentary coalition.

Marek Węgrzanowski

X-Trade Brokers Dom Maklerski SA