March 21 (Bloomberg) -- The Polish zloty led gains among regional currencies, paring the biggest weekly drop since mid- February, as European Union leaders approved an increase in aid to distressed ex-communist economies.

The zloty climbed 1 percent to 4.5862 per euro by late yesterday in Warsaw, reducing its loss to 2.2 percent, the biggest since the week ending Feb. 13.

EU leaders agreed to boost funding for the International Monetary Fund, which provided aid to Hungary in October and is in discussions with Romania about a loan, and to double a credit line for countries in financial distress to 50 billion euros ($68 billion).

“That definitely is a positive” for central Europe as there is “potentially is a much larger source of funding,” said Martin Blum, head of emerging-market economics and currency strategy at UniCredit SpA in Vienna. “There is a potential for slightly stronger currencies.”

The Hungarian forint and zloty are among the worst- performers this year of the 176 currencies tracked by Bloomberg as plunging exports, dwindling investment and slowing growth makes it harder for them to pay foreign debt.

Central bankers from Austria, the Czech Republic, Hungary, Poland, Slovakia and Slovenia met in Budapest yesterday, the Hungarian central bank said in a statement on its Web site.

They agreed to “continue the in-depth monitoring of their financial systems and agreed to extend the cooperation to further strengthen the macroprudential oversight throughout the region,” the Magyar Nemzeti Bank said.

Forint Gains

The forint followed the zloty higher yesterday, advancing 0.4 percent to 301.05 against the common currency. The BUX Index of shares traded in Budapest rose 4.5 percent to its highest level in a month. Hungary was the first EU member to receive outside aid to avert a default, signing an IMF-led deal worth 20 billion euros.

The forint pared its weekly loss against the euro to 1.4 percent and its decline this year to 12 percent, the worst among the 25 emerging-market currencies tracked by Bloomberg.

The Czech koruna gained for the first time in three days, advancing 0.8 percent to 26.665 per euro, trimming the loss on the week to 1 percent. The currency strengthened 0.7 percent against the euro this year.

The Romanian leu rose 0.2 percent to 4.2974 against the common currency. It depreciated 0.4 percent this week and 6.3 percent this year.

The Turkish lira rose 1.6 percent to 1.6845 per dollar, gaining 1.7 percent in the past five days. That has reduced the loss this year to 8.6 percent. The central bank on March 19 reduced its benchmark interest rate 1 percentage point to 10.5 percent, a record low, to revive the economy.

To contact the reporter on this story: Yon Pulkrabek in Prague on ypulkrabek@bloomberg.net

Last Updated: March 21, 2009 03:30 EDT