The zloty slid the the weakest level since September after a report showed Polish retail sales dropped the most since 2005 in December.
The zloty retreated 0.6 percent to 4.1960 per euro at 11:22 a.m. in Warsaw, the weakest since Sept. 5. It had the steepest weakening after the Indonesian rupiah among more than 20 emerging-market currencies tracked by Bloomberg. The yield on 10-year notes fell 3 basis points, or 0.03 percentage point, to 3.80 percent, the seventh day of declines.
December retail sales declined 2.5 percent from a year earlier, boosting pressure on the central bank to continue cutting borrowing costs to spur the economy. That was the steepest drop since April 2005 and compared with a median forecast for a 1.2 percent increase in a Bloomberg survey of 22 economists.
“The report fits the overall picture of deepening slowdown and strengthen expectations for an interest rate cut in February,” Grzegorz Maliszewski, chief economist at Bank Millennium SA in Warsaw, said in e-mailed report today.
While nothing indicates Poland’s economy will contract or experience a recession this year, the slowdown will be deeper and longer than in 2009, Jerzy Hausner, one of the 10 members of the Monetary Policy Council, said on Polish Radio 1 today.
The data came after reports showed the biggest slump in industrial output in more than three years as inflation slowed to the central bank’s target. Policy makers said on Jan. 9 they may pause after cutting interest rates for a third month in a row.
Investors in the forward-rate agreements market expect the central bank to reduce borrowing costs by another 92 basis points, based on a gap between nine-month contracts and three-month Warsaw Interbank Offered Rate compiled by Bloomberg.