TMS FX weekly Commentary

The U.S . dollar was quoted 3.94 at the end of the week against 3.82 on Monday's session. Against the euro, the złoty fluctuated between 4.69-4.77. The main reason of the weakness was political instability. The SLD scission developed in to a open split with the exit of a group of deputies who left to form a new party called Socjaldemokracja Polska, which only made markets more nervous. According to the Parliamentary Speaker - Marek Borowski, the fact that the government lacks a stable majority in the Parliament will lead to an early General Elections, which may end up in the abandonment of the Hausner's plan. The złoty did not recover even when the Finance Ministry declared to convert on the market the funds from previously sold bonds on foreign markets. Another factor of uncertainty is the Central Bank's monetary policy. Next week the Monetary Policy Council will hold a monthly meeting. This event will be closely observed as the MPC members issue contradictory statements regarding t he monetary policy, which is neutral at the moment. The zloty may depreciate more against major currencies at the beginning of next week but should recover thereafter. We expect the international market to stay very volatile next week.