The zloty slid to the weakest level in more than three weeks after Polish central bank Governor Marek Belka said the exchange rate is “about where it should be” and ruled out further interest-rate increases.

The zloty lost 0.7 percent to 4.1109 per euro as of 6:22 p.m. in Warsaw, the lowest since Aug. 2, paring the month’s rally that sent the currency to a 12-month high on Aug. 6. Ten- year bond yields were unchanged at 4.87 percent, data compiled by Bloomberg show.

Poland’s central bank, the only one in the European Union to raise interest rates this year, has changed its “policy bias” and prospects for cutting borrowing costs have increased, Belka told Radio PiN in an interview today. The zloty is nearing a level justified by Poland’s economic fundamentals, he said.

“In the context of the coming interest rate cuts, the exchange rate may not move in the zloty’s favor,” Bank Pekao SA (PEO) economists including Marcin Mrowiec wrote in a note today.

Investors in Polish interest rate derivatives are betting that the central bank will start cutting borrowing costs before the end of this year. Three-month forward rate agreements are trading 38 basis points below the three-month Warsaw Interbank Offered Rate, according to data compiled by Bloomberg.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

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