The zloty strengthened the most this year and Polish government bond yields hit record lows on reports of Asian capital inflows and U.S. labor market data stoking expectations for more global monetary easing.
The zloty appreciated 0.8 percent to 4.1546 against the euro at 5:23 p.m. in Warsaw, the most since Dec. 27. The yield on Poland’s 10-year government notes fell 16 basis points, or 0.16 percentage point, to 3.62 percent, the lowest on record.
“Everything that has a yield is being bought now,” Sebastian Cichy, foreign exchange trader at BNP Paribas in Warsaw, said by phone today. “There’s a mega-buy on Polish bonds and this affects the currency.”
There are “very large inflows from Asian investors” into Polish bonds after the Bank of Japan (8301) eased monetary policy yesterday, deputy Finance Minister Wojciech Kowalczyk was cited as saying by Reuters today. Weaker-than-expected U.S. data is driving speculation that the Federal Reserve will continue to buy bonds, boosting liquidity and a global hunt for yield which has fuelled inflows into zloty debt.
“Poland is doing relatively well compared to other countries and we are still attractive,” Marek Kaczor, the Warsaw-based head of fixed income and derivatives at PKO Bank Polski SA, Poland’s largest lender, said by phone today.
Employers hired fewer U.S. workers than forecast in March and a slump in the size of the labor force pushed the jobless rate down to a four-year low, indicating the U.S. job market is struggling to make bigger strides.
Pressure is also piling on Poland’s central bank to resume rate reductions after Poland’s economy grew at the weakest pace in four years in the fourth quarter of 2012 and inflation was the slowest since 2006.
Policy makers cut borrowing costs by a total 150 basis points since November to a record low of 3.25 percent and Governor Marek Belka said after last month’s reduction that the rate panel adopted a “wait-and-see” approach. All 34 economists surveyed by Bloomberg expect interest rates to stay unchanged next week.
Nine-month forward rate agreements, derivatives used to bet on interest rates, traded 51 basis points below the Warsaw Interbank Offered Rate, signaling bets for more than two quarter-point rate reductions this year.
The BOJ announced plans to double its monthly bond purchases to about 7.5 trillion yen ($77.8 billion) as it seeks to achieve 2 percent annual inflation in two years, helping spark a global bond rally.
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