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Zloty Set for 2-Month Low as Europe Woes Eclipse Moody’s Laud

The zloty headed for its weakest close in more than two months as concern that Europe’s economic recovery is faltering overshadowed praise from Moody’s Investors Service for Poland meeting its borrowing needs in advance.

The zloty slipped 0.2 percent at 4:20 p.m. in Warsaw to 4.1926 per euro, the weakest level on a closing basis since Jan. 31. The 2.6 percent decline this year is the fourth-worst among emerging-market currencies after South Africa’s rand, Hungary’s forint and the Czech koruna, data compiled by Bloomberg show.

Investors are awaiting guidance from the European Central Bank meeting tomorrow on the condition of the euro-area economy, Andrzej Krzeminski, head of foreign exchange at Bank BPH SA in Warsaw, said by phone today. The single-currency region accounts for more than half of Poland’s exports.

“There are fears the economic situation will not improve as quickly as expected,” Krzeminski said.

Poland’s “brisk progress” toward meeting its 2013 funding needs is “credit positive,” Moody’s analyst Jaime Reusche wrote in a report yesterday. The government covered 60 percent of its total 145 billion zloty ($44 billion) borrowing plan for 2013 in the first quarter and will be 80 percent complete by the end of June, Piotr Marczak, head of the Finance Ministry’s public debt department, said in an e-mailed statement March 28.

The yield on Poland’s 10-year bonds fell for a second day, sliding two basis points, or 0.02 percentage point, to a two-week low of 3.85 percent.

Pension Contributions

The ECB will keep its benchmark rate unchanged at a record low of 0.75 percent, according to 54 of 56 economists surveyed by Bloomberg News. Two predict a reduction to 0.5 percent. The central bank last month pared its outlook for a recovery, predicting a contraction of 0.5 percent for the euro area this year and growth of 1 percent in 2014.

The European Union’s largest eastern economy is facing its worst slowdown in 12 years. Poland’s budget deficit reached 61 percent of the annual target by the end of February as tax revenue declined.

Goldman Sachs Asset Management “doesn’t see value” in local Polish bonds, Sam Finkelstein, who helps manage $40 billion in emerging-market bonds at the company, said in a telephone interview from London today.

The government hasn’t yet decided whether it will cut contributions to privately managed pension funds to narrow the deficit, Finance Minister Jacek Rostowski said in an interview with TVN24 today. Gazeta Wyborcza reported that the government may limit transfers to pension funds by taking over part of the contributions they invest in bonds, without saying where it got the information.

Proposed changes to the pension system will be announced in May or June, Rostowski told TVN24.

It is too early to determine whether Poland will be able to reduce its public debt this year, Deputy Finance Minister Wojciech Kowalczyk told PAP newswire today. Public debt dropped to 52.7 percent of gross domestic product last year from 53.5 percent in 2011, according to the Finance Ministry’s figures published on its website yesterday.

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