Currency report: Złoty rallies on US rate cut

The decision was a surprise to the market since most analysts expected a cut of just 25 basis points. The American dollar tumbled against most world currencies. Riskier currencies, including the Polish złoty, advanced.

The recession in the US housing market and problems with high-risk mortgages caused the Federal Reserve to make an aggressive move. The loosening of the US's monetary policy helped the equities markets but was a killer for the greenback. The decision to decrease the cost of money by 50 basis points caused a massive sell-off of the dollar. After starting the week at $1.3863, the EUR/USD reached an all-time high on Friday morning at $1.4118 and is still in an upward trend.

Declining risk aversion caused investors to seek more profitable investments. Poland, which is still considered an emerging market, was a perfect target. The Polish currency gained throughout the week against the American dollar and the euro. The EUR/PLN reached the week's high on Monday at zł.3.7876 but declined to zł.3.7625 on Friday. The USD/PLN tumbled from zł.2.7342 all the way to zł.2.6645 on Friday morning.

Adam Narczewski, X-Trade Brokers Dom Maklerski SA