The zloty weakened against the euro for the first week in three after a deeper-than-expected interest rate cut took Polish borrowing costs to a record low.
The Polish currency declined as much as 0.9 percent against the euro on March 6 when the central bank surprised investors by lowering the reference rate by 50 basis points to 3.25 percent, citing lower inflation and economic growth forecasts. The zloty continued to weaken yesterday before gaining for the first time in three days today.
The zloty strengthened 0.1 percent to 4.1438 against the euro at 11:39 a.m. in Warsaw, paring this week’s decline to 0.2 percent. Yields on two-year government bonds were little changed at 3.41 percent today after a 15 basis-point decline in the last two days, the biggest over such a period since Dec. 20.
“Weaker economic data and a deterioration of prospects for budget revenues won’t help the zloty,” analysts at Bank Pekao SA (PEO), led by Marcin Mrowiec, wrote in a report today, forecasting the zloty at 4.19 per euro by the end of March. “A weakening of the zloty in the next few months will be neutralized by signs of improvement in the economy. This should help reverse the declines in the second half of the year.”
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