Zloty scores record high against the euro, but depreciation to come

Polish currency continues to gain strength, with the euro recording a new record low, dipping below the 3.5 level, while the U.S. dollar sank to zl.3.95. Boguslaw Grabowski, a member of the Monetary Policy Council (RPP), said that the zloty is overvalued from the point of view of macroeconomic balance. He also anticipated that "depreciation will start in the second half of the year." Marcin Bilbin of Bank Handlowy offered two main reasons for the zloty's soar, i.e. companies' proneness to exchange foreign currencies for zlotys and the decline of the euro's value on international markets. However, if there is a considerable rise in the inflation level, then interest rate cuts will become less likely and the zloty will start to weaken, according to BRE Bank analysts. (Gazeta Wyborcza, p.20)M. S.-C.