Bloomberg News

Zloty Jumps as Polish Central Bank Buys on Market to Curb Swings

June 07, 2013

Zloty Surges Most in Year as Central Bank Buys Polish Currency

Polish zloty currency notes and coins are arranged for a photograph. Photographer: Bartek Sadowski/Bloomberg

The zloty advanced the most in 10 months as Poland’s central bank sold foreign currencies on the market to curb volatility, which set a six-month high.

The central bank’s first market purchases since 2011 helped the zloty advance 1.7 percent to 4.2419 per euro at 7:57 p.m. in Warsaw, the biggest appreciation since Aug. 3, after slumping to a one-year low yesterday. It was the biggest gain among more than 170 currencies tracked by Bloomberg. The zloty’s three-month historic volatility jumped to 6.68 today, the highest since Dec. 4.

“This absolutely isn’t an attempt to fight the trend or anything like that,” PAP newswire cited central bank Governor Marek Belka as saying. “There was just a little craziness over the past few days and we gave it a kick,” Belka was quoted as saying.

The Polish currency has weakened and zloty government bonds sold off, along with other emerging-market assets, after U.S. Federal Reserve Chairman Ben S. Bernanke said on May 22 that policy makers could reduce stimulus if there were sustained improvement in the U.S. economy. The Warsaw-based Narodowy Bank Polski “sold a certain amount of foreign currency for zloty this afternoon,” according to an e-mailed statement from the bank’s press office.

‘Wrists Slapped’

The Polish central bank isn’t confronting the “overall emerging-markets trend,” Rafal Benecki, ING Bank Slaski SA’s chief economist for Poland, wrote in a note to clients today.

Belka said the central bank doesn’t act “in the interest of currency-market speculators,” according to PAP. “Somebody thought they could make money betting on a weaker zloty and got their wrists slapped,” he was quoted as saying.

The zloty’s historic volatility is the fourth-lowest among the 24 emerging-market currencies tracked by Bloomberg. The South African rand’s 13.4 reading shows the greatest propensity for movement, while the Bulgarian lev is most stable at 2. The zloty has weakened 3.8 percent against the euro this year, compared with declines of 1.4 percent by the Hungarian forint and 1.9 percent by the Czech koruna.

Disorderly, Disruptive

“This is more a case of the NBP letting the market know it is there, and it would not be appreciative of a disorderly and likely disruptive sell-off,” Tim Ash, London-based chief emerging-markets economist at Standard Bank Plc, said in a research note.

Poland’s central bank entered the currency market as a report showed U.S. employment increased more than economists forecast, triggering a decline in American government bonds.

The yield on Poland’s two-year government notes fell three basis points, or 0.03 percentage point, to 2.87 percent, its first decline in four days. The rate on the securities set a record low of 2.50 percent on May 14, down from 3.15 percent on Dec. 31. The spread over similar-maturity German debt narrowed seven basis points to 269, falling from a six-week high.

The extra yield on Poland’s dollar bonds over U.S. Treasuries fell nine basis points to 133, according to data from JPMorgan Chase & Co.

No Contradiction

Belka said there was no contradiction between the Polish central bank’s monetary easing and intervening to support the zloty, according to PAP. Belka’s 10-member Monetary Policy Council has reduced the refinancing rate by 200 basis points since November to a record 2.75 percent at this week’s meeting.

Poland’s central bank last sold currencies on the market in 2011, according to its previous statements. When asked about a weaker zloty at the monthly central bank’s news conference in Warsaw two days ago, Belka said “it’s not a factor we’re especially concerned about.”

“Taking into account the recent words of Marek Belka and the condition of the economy -- stagnating growth, minimal inflation -- these interventions seem hardly understandable,” BZ WBK SA economists, led by Maciej Reluga, wrote today in a note to clients.

To contact the reporter on this story: Maciej Onoszko in Warsaw at monoszko@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net


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