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Zloty Declines on Forint Plunge, Weaker Polish Economic Outlook

The zloty weakened the most in three days as a plunge in the Hungarian forint and lower economic growth forecasts for Poland soured investor sentiment.

Hungary’s currency tumbled to a nine-month low after new central bank President Gyorgy Matolcsy stripped two of his deputies appointed under a previous government of some of their powers, raising concern he will reshape monetary policy-making, according to Intesa Sanpaolo SpA’s CIB unit in Budapest. Poland’s central bank cut its projection for economic growth in 2013 to 1.3 percent, from a forecast of 1.5 percent in November.

The zloty depreciated 0.3 percent to 4.1440 against the euro at 4:57 p.m. in Warsaw, the biggest decline since March 6. Yields on Poland’s 10-year government bonds rose three basis points, or 0.03 percentage point, to 4.02 percent.

“We do not expect to see a sustainable recovery of the zloty” in the “short term,” Thu Lan Nguyen, an analyst at Commerzbank AG, wrote in a note dated March 11, saying low inflation and weak economic growth “might refuel rate cut speculation again”.

Poland’s central bank cut its forecast for inflation this year to 1.6 percent from 2.5 percent projected in November, it said in a March inflation report published today. GDP grew at 2 percent in 2012.

Policy makers cut the main interest rate by 50 basis points, more than economists forecast, last week as consumer spending plunged and the euro-area recession curbed exports. The central bank will pause now after five reductions since November took the nation’s benchmark rate to 3.25 percent, Governor Marek Belka said March 6.

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