Poland Didn’t ‘Intervene’ to Support Zloty Yesterday

Poland didn’t sell euros to prop up the zloty yesterday and sees no need to intervene on the currency market, according to Finance Minister Jacek Rostowski.

The zloty has rallied from the lowest intraday level in more than four months on Nov. 29 on speculation European leaders will step up their response to the debt crisis and after reports showed Polish economic growth accelerated. The currency gained 2.5 percent in two days through yesterday, the biggest appreciation since May.

“The ministry doesn’t intervene in the market,” Rostowski said in an interview on Radio RMF FM today. The zloty appreciated yesterday “definitely” without the ministry’s involvement, he said. The central bank might step into the market if there is “major turbulence,” Rostowski was quoted as saying by PAP newswire.

Poland is continuing to “take advantage” of a weaker zloty to exchange part of about 5.6 billion euros ($7.4 billion) held by the Finance Ministry, Piotr Marczak, head of the ministry’s public debt department, said on Nov. 29. He declined to say whether the ministry conducted any transactions on the currency markets recently.

Investors are focused on “hints from the Finance Ministry that they can” shore up the currency, Gyula Toth, an emerging- market strategist at UniCredit SpA in Vienna, wrote in a note to clients yesterday. The zloty was unchanged at 4.0053 per euro at 2:20 p.m. in Warsaw.

‘We Have the Money’

“We have the money,” Rostowski said. “When the exchange rate is high it’s a good moment to exchange the euros for zloty because we get more zloty.” He declined to provide any outlook on the currency.

Poland may act to stem the zloty’s drop as the weakening currency pushes public debt toward a legal limit set at 55 percent of gross domestic product, BNP Paribas said in a note to clients last week.

The Finance Ministry calculates the value of the foreign debt in zloty, using the exchange rate from the last working day of the year. Public debt will probably reach 53 percent to 53.5 percent of gross domestic product at the end of the 2010, Rostowski was quoted as saying by PAP newswire today. A breach of the 55 percent threshold would prompt mandatory spending cuts and tax increases. Poland holds general elections next year.

Public Debt

Poland’s public debt stood at 704.7 billion zloty ($231.7 billion) at the end of September, including the equivalent of 194.6 billion zloty denominated in foreign currencies, the ministry said Nov. 22.

State-owned Bank Gospodarstwa Krajowego sold euros at 4.2 zloty on May 20, acting on instructions from the Finance Ministry, ING Groep NV and BRE Bank SA wrote in notes to clients the next day. Chief Executive Officer Tomasz Mironczuk declined to confirm the transactions, saying BGK’s dealings with the ministry were “an issue between the bank and its client.”

The last time Poland said it exchanged foreign currencies on the market through BGK was on Feb. 18, 2009. Poland then sold some European Union funds the day after the zloty dropped to 4.9307 per euro, the lowest level in almost five years. The Finance Ministry called the transaction a “standard operation” to take advantage of “a very attractive exchange rate.”

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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