Currency report: Złoty tumbles

The global crisis on equities markets is directly affecting main currencies. Investors are selling off riskier currencies, taking their profits, and putting their money into the much safer euros and American dollars. Increasing risk aversion is affecting all of the emerging markets' currencies, including the złoty. The EUR/PLN started the week at zł.3.7674 but increased to zł.3.8493. The złoty also depreciated against the greenback, going from zł.2.7477 on August 13 to zł.2.8777 on August 17.

The depreciation of the Polish currency was also caused by worse-than-expected macroeconomic publications. The Polish current account deficit deepened to E1.182 (zł.4.535) billion against a forecasted E803 (zł.3,081) million. What made the złoty less appealing to foreign investors was Wednesday's CPI inflation report, which showed a reading of -0.3 percent on a monthly basis and 2.3 percent on a yearly basis, against expectations of -0.1 percent and 2.4 percent respectively. The lower inflation makes it less probable that the Polish Monetary Policy Council will raise interest rates in the near future.

Adam Narczewski, X-Trade Brokers Dom Maklerski S.A.