Zloty Declines to 5-Week Low

The major currency of Poland, Zloty has declined to a figure that’s the lowest in last 5 weeks. The inflation in Poland has decelerated to the slowest place in last 7 years and thereby speculations are rife now that the Central Bank will cut the interest rates soon.

Zloty has declined by 0.5% on today and it is currently at 4.1871 per Euro. This is the 2nd worst performance if all the emerging market currencies are considered on today, just behind Koruna, the major currency of Czech Republic. On the other hand, the forward rate agreements which are used for betting on the future interest rate changes, declined, for the 1st time in the last 3 days. These have gone down by 5 basis points and are currently at 55 points below than the Warsaw Interbank Offered Rate. This shows further scope of a more than 2 quarter percentage point cuts.

The Statistics Office announced that the consumer prices have increased by 0.8% in April, if compared to that of April, 2012. This is the lowest rate since June, 2006. This is almost at par with the predicted 0.7% increase by the economists. According to a member of the Rate Setting Committee of the Central Bank, Anna Zielinska-Glebocka, there is some room if rate cut is in consideration. Zielinska-Glebocka however believes that if any rate cut is to be made by the Central Bank, the same should be done as soon as possible, rather than wasting any further time.

According to the Head of Foreign Exchange Department of Bank BPH SA, Andrzej Krzeminski, though the inflation figures are slightly higher than what was predicted, the same is still on a decline mode. It is clearly below the 1% level now and that’s a positive sign. Krzeminski added that as the current account data is weak, the same had a negative influence on Zloty.

In March, the current account deficit of Poland was at 200 million Euros. This is way higher than the predicted shortfall of 79 million Euros. Incidentally, in April, the inflation of this European country had declined for the 7th straight month, marking the longest losing streak for Poland in last 8 years.

The 2-year bond yield of the Polish Government increased by 2 basis points and the same is now at 2.52%, thereby extending its streak of rally to 4 days.