The zloty headed for its steepest decline since January after services and factory output shrank for a 15th month in the euro area, Poland’s largest trading partner.
The currency weakened for a second day as German factory and service company indexes unexpectedly dropped in April, suggesting weakness in the euro region is persisting into the second quarter. Poland shipped 51 percent of its exports to the euro region in February, the statistics office said on April 15.
“Poor data in Germany and in the whole euro region was the main factor that weakened the euro-dollar and the zloty followed,” Bartlomiej Rostek, a Warsaw-based senior foreign- exchange trader at ING (ING) Bank Slaski SA, said by phone.
The exchange rate slid 0.7 percent to 4.1335 per euro at 1:07 p.m. in Warsaw, depreciating the most since Jan. 28. Government bonds extended their rally after the Finance Ministry sold 10.5 billion zloty ($3.3 billion) in two-year and five-year fixed-rate papers as well as floating-rate notes due in 2017 at an auction today. The yield on two-year securities fell for an eighth day to 2.79 percent, the longest streak since November, according to data compiled by Bloomberg.
The zloty broke through a resistance level of 4.12 and left the recent range of 4.09-4.12, a sign foreign investors may bet on “further weakening,” ING’s Rostek said.
Poland’s retail sales grew 0.1 percent from a year earlier in March, less than economists estimated, as unemployment at a six-year high damped consumer spending, the statistics office said today.
Polish central bankers are open to further monetary easing after leaving rates at a record low as they assess whether a recovery has started, Governor Marek Belka said on April 10. Reports this month showed inflation slowed to the weakest pace in more than six years and industrial output shrank in March, signaling the rebound hasn’t begun.
A German manufacturing gauge compiled by Markit Economics retreated to 47.9 in April from 49 in the previous month, while the median estimate of 29 economists in a Bloomberg News survey called for no change. For services, the index slipped to 49.2 from 50.9. Economists had predicted an increase to 51. Readings below 50 show contraction.
A euro-area composite index based on a survey of purchasing managers in services and manufacturing industries held at 46.5, in line with the median forecast of 26 economists in a Bloomberg News survey.
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