Currency report: Złoty takes a dive

Last Thursday Law and Justice ended its coalition with the Self-defense party after a row over next year's budget and a decision to send more troops to Afghanistan, pushing Poland towards early polls. Lepper's departure would end pressure on higher spending that could blow the budget deficit above the pledged ceiling of zł.30 billion (three percent of GDP). After the news broke, the złoty fell to a one-and-a-half-week low against the euro at zł.3.99 on Friday.

The Polish currency weakened earlier last week after anti-government demonstrations in Hungary over the Prime Minister's admission he lied to voters to win April elections. The Fitch agency cut its debt-rating outlook for Hungary.

Last Friday Zyta Gilowska returned to the government and replaced Stanisław Kluza as Finance Minister. Investors ignored the development, and now expect a fresh round of parliamentary elections. The critical level for EUR/PLN is zł.4.

Marek Węgrzanowski

X-Trade Brokers Dom Maklerski SA