Currency report: Złoty gains as rates stay put

The złoty was lifted by improved emerging markets sentiment and a weakened US dollar, and was unfazed by a central-bank projection showing inflation set to accelerate faster than previously expected.

The Monetary Policy Council kept rates at a record low in Poland of four percent last Wednesday, as it did not manage to find a compromise between hawkish and dovish members. Probably the central bank will not change its policy until year's end.

Leszek Balcerowicz and his allies on the 10-member council are pushing for a preemptive rate-rise this year to cool down Poland's red-hot economy, and the bank's new projection on Thursday showed inflation set to soar above its 2.5-percent target in 2008. Urszula Grzelońska, the ruling conservatives' candidate to replace Balcerowicz, said she could support steady rates for the next six months.

The Polish currency should still be supported by good fundamental data, but later gains will be limited.

Marek Węgrzanowski

X-Trade Brokers Dom Maklerski SA