Zloty Gains Second Day as Cyprus Averts Panic Bank Withdrawals

The zloty gained for a second day, erasing earlier declines, as the reopening of banks in Cyprus eased concern that debt crisis would worsen in the euro area, the consumer of more than half of Poland’s exports.

Poland’s currency traded 0.1 percent stronger at 4.1768 per euro as of 5:46 p.m. in Warsaw, after depreciating as much as 0.3 percent. The zloty is down 2.3 percent this year, the worst quarterly performance since the three months through September 2011.

Cyprus’s banks opened for the first time in almost two weeks at midday local time today, with new rules curbing access to cash preventing an initial panic to withdraw deposits. The euro area accounted for 53 percent of Polish exports in January, the Statistics Office in Warsaw said on March 13.

Poland’s Finance Ministry plans to offer from 25 billion zloty ($7.7 billion) to 35 billion zloty in bonds in the second quarter to secure as much as around 80 percent of this year’s borrowing needs, Piotr Marczak, the head of the Finance Ministry’s public debt department, said in an e-mailed statement today.

The size of the offer is “just right” and the ministry is “wisely making use” of low yield levels to cover as much borrowing needs as possible early this year, Pawel Radwanski, a fixed-income analyst at Raiffeisen Polbank SA, said by phone.

The yield on Poland’s 10-year bonds rose four basis points, or 0.04 percentage point, to 3.93 percent, increasing for a second day.

Rate Cuts

There is still room to cut interest rates, Monetary Policy Council member Anna Zielinska-Glebocka said late yesterday. Poland’s central bank signaled this month a pause in its easing cycle after cutting interest rates by 150 basis points since November to a record 3.25 percent.

Seven policy makers voted for and two against cutting rates by 25 basis points at a rate council meeting on Feb. 6, PAP newswire said today, citing a voting record published by the government’s Judicial and Economic Monitor.

Poland’s budget situation isn’t critical and the budget’s performance was “better than expected” in March, Finance Minister Jacek Rostowski said in an interview with radio RMF FM today. The deficit reached 21.7 billion zloty ($6.6 billion), or 61 percent of the annual limit, at the end of February, the Finance Ministry said on March 15.

The budget will be boosted with 5.3 billion zloty from the central bank’s 2012 net income, PAP reported yesterday, citing a person with knowledge of the matter who asked not to be identified.

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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