Złoty slips up as the dollar rebounds
The price of the U.S. dollar grew to zł.3.2180, following the greenback's rebound on the international markets. Investors' sentiments cooled towards emerging markets' currencies due to recent events in Hungary where the government again assaulted the central bank for its high interest rates and strong forint policy. The złoty's deeper fall was delayed by the Finance Minister, Mirosław Gronicki, who said that public debt would be lower than 51 percent of GDP this year. The Polish currency was also supported by the comments of presidential economic adviser Witold Orłowski. He said the złoty could strengthen even below zł.4 against the euro due to strong fundamentals and investor confidence.
This time macro figures disappointed the investors. Economic growth slowed more than expected in the third quarter to 4.8 percent (analysts had predicted five percent). Unfortunately investment was not satisfactory. It seems that we should not expect huge progress in investments in the short term. This data is important in light of the coming Monetary Policy Council (MPC) meeting. This time, the meeting is earlier than usual, due to the holidays, so not all the data will be available. Thanks to a strong złoty and little progress in investment recovery, we should not expect the MPC to change its policy. Rates are likely to be kept unchanged and a restrictive bias should be sustained.
Economy Minister Jerzy Hausner again tried to help Polish exporters. This time he excluded intervention on the market to curb the złoty's strength but said that lowering interest rates could be a solution. Right now such a decision is unlikely, but Hausner has raised the issue for debate. However, the central bank's officials will probably not respond to this idea. Leszek Balcerowicz, the central bank's governor, is against any intervention on the currency market.
On the international markets, the dollar finally rebounded from heavy losses suffered over the past few weeks. Despite the greenback's strong downward trend, the euro-dollar exchange rate did not manage to break above the psychologically important level of $1.35 and dropped to $1.3140. Last week, the euro was on an all-time high of $1.3468. The yen also eased to JPY106.15. It is important to notice that according to an official survey, Japanese firms were not affected by the recent yen levels below JPY105. In light of this survey, fears over the Bank of Japan intervening should weaken.
Investors decided to take profits before the end of the year. The dollar was also supported by the coming U.S. Federal Reserve meeting and widely expected another rate hike decision (if so, U.S. rates would be higher than the euro rates). Nevertheless, the dollar's return was probably just a short-term corrective move. The main reasons for the dollar's weakness remain unchanged-the market participants have not forgotten.
Krzysztof Rup, Warsaw Investment Group (WGI)
This time macro figures disappointed the investors. Economic growth slowed more than expected in the third quarter to 4.8 percent (analysts had predicted five percent). Unfortunately investment was not satisfactory. It seems that we should not expect huge progress in investments in the short term. This data is important in light of the coming Monetary Policy Council (MPC) meeting. This time, the meeting is earlier than usual, due to the holidays, so not all the data will be available. Thanks to a strong złoty and little progress in investment recovery, we should not expect the MPC to change its policy. Rates are likely to be kept unchanged and a restrictive bias should be sustained.
Economy Minister Jerzy Hausner again tried to help Polish exporters. This time he excluded intervention on the market to curb the złoty's strength but said that lowering interest rates could be a solution. Right now such a decision is unlikely, but Hausner has raised the issue for debate. However, the central bank's officials will probably not respond to this idea. Leszek Balcerowicz, the central bank's governor, is against any intervention on the currency market.
On the international markets, the dollar finally rebounded from heavy losses suffered over the past few weeks. Despite the greenback's strong downward trend, the euro-dollar exchange rate did not manage to break above the psychologically important level of $1.35 and dropped to $1.3140. Last week, the euro was on an all-time high of $1.3468. The yen also eased to JPY106.15. It is important to notice that according to an official survey, Japanese firms were not affected by the recent yen levels below JPY105. In light of this survey, fears over the Bank of Japan intervening should weaken.
Investors decided to take profits before the end of the year. The dollar was also supported by the coming U.S. Federal Reserve meeting and widely expected another rate hike decision (if so, U.S. rates would be higher than the euro rates). Nevertheless, the dollar's return was probably just a short-term corrective move. The main reasons for the dollar's weakness remain unchanged-the market participants have not forgotten.
Krzysztof Rup, Warsaw Investment Group (WGI)
