The zloty appreciated the most in three weeks ahead of the European Central Bank decision on interest rates this week and as investors cheered a new government in Italy.
The currency advanced 0.6 percent to 4.1324 per euro at 3:01 p.m. in Warsaw, the biggest gain since April 8. The yield on two-year securities fell six basis points, or 0.06 percentage point, to a record 2.65 percent, according to data compiled by Bloomberg.
Italy’s government bonds rose, pushing 10-year yields toward the lowest level since October 2010, as the swearing-in of a new prime minister yesterday ended nine weeks of political deadlock. The European Central Bank will reduce its main refinancing rate by a quarter of a percentage point from the current all-time low of 0.75 percent, according to the median forecast from a Bloomberg survey of economists. The U.S. Federal Reserve will start a two-day policy meeting tomorrow.
“The zloty gains as there’s a general risk-on mode on the markets,” Marcin Turkiewicz, a foreign-currency trader at BRE Bank SA in Warsaw, said by e-mail today. “Investors expect a dovish comments from the Fed and that the European Central Bank will cut rates which will increase the interest-rate disparity,” with Poland and make zloty assets more attractive, he said.
Poland’s main interest rate is at a record low of 3.25 percent since March, driving down the spread over the ECB’s key rate to 250 basis points, the lowest since January 2011.