Bloomberg News

Zloty Gains as Polish Bond Yields Drop to Lowest in Seven Weeks

October 27, 2011

Oct. 27 (Bloomberg) -- The zloty gained and Polish bonds rallied as euro-area leaders agreed to expand a bailout fund to stem the debt crisis, boosting demand for risk worldwide.

The Polish currency appreciated as much as 1.8 percent, the most since Oct. 10, and traded 1.4 percent stronger at 4.3210 per euro by 4:50 p.m. in Warsaw. Bond gains sent five-year yields down eight basis points, or 0.08 percentage point, to 4.973 percent, headed for the lowest closing level since Sept. 8.

Global stocks and commodities advanced and most emerging- market currencies strengthened after French President Nicolas Sarkozy said the bailout fund will be leveraged by four to five times, and investors have agreed to a writedown of 50 percent on Greek debt.

“Markets have responded with extreme bullishness to the summit’s dubious success,” Warsaw-based economists at ING Groep NV wrote in a research note today. “There are a lot of question marks about whether this optimism can last. To push euro-dollar in the direction of 1.45 and euro-zloty below 4.30 we’ll need continued quantitative easing three in the U.S. and the involvement of investors from outside the euro area.”

Poland will introduce “structural reforms” to ensure long-term stability of public finances, Jan Krzysztof Bielecki, the head of the government’s Council of Economic Advisers, said in an interview today on Radio RMF FM. Next year’s budget plans will be adjusted to forecasts by the International Monetary Fund for the economic growth to slow to 3 percent next year, he said.

The zloty strengthened 3.8 percent to 3.0484 per dollar.

--With assistance from David McQuaid in Warsaw. Editors: Linda Shen, Tim Farrand

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net; Pawel Kozlowski in Warsaw at pkozlowski@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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