The zloty strengthened for a fifth day, the longest streak since April, as Polish output beat analyst expectations and Federal Reserve Chairman Ben S. Bernanke said Fed asset purchases aren’t “on a preset course”.
The zloty strengthened 0.2 percent to 4.2453 against the euro at 4:42 p.m. in Warsaw, extending its five-day advance to 2.3 percent, the biggest gain among the more than 150 currencies tracked by Bloomberg. The yields on 10-year governments bonds rose nine basis points, or 0.09 percentage point, to 4.01 percent, after jumping as much as 18 basis points before the publication of Bernanke’s prepared speech.
Polish industrial output rose 3 percent from a year earlier in June, after declining 1.8 percent the previous month, the Central Statistical Office in Warsaw said today. That exceeded the median estimate for a 1.5 percent increase in a Bloomberg survey of 31 economists. Bernanke said the U.S. central bank’s asset purchases may be reduced more quickly or expanded as economic conditions warrant, reassuring investors he would not cut off the stimulus quickly if growth disappoints.
“With the more dovish tone just now from Bernanke, we can see the zloty continue to outperform,” Peter Attard Montalto, emerging-markets economist at Nomura International Plc, said in an e-mailed response to questions today. “Strong growth is clearly the decisive factor for a market that was overly” bearish on growth this year, he said.
The zloty could see a “short-term retracement after such a large” strengthening in past days, before appreciating toward 4.15 per euro by the end of September, Montalto said.
Poland’s government, facing the slowest economic growth since the 1990s, yesterday unveiled plans to widen the budget deficit by 16 billion zloty ($4.96 billion) and suspend rules limiting fiscal stimulus.
“Investors were prepared for such an announcement but there is a risk that the changes in austerity measures are ultimately perceived as a permanent loosening of fiscal discipline,” Societe Generale SA emerging-markets strategists, led by Benoit Anne, wrote in a note today.
The fiscal plan “does not yet alter our medium-term view” of Poland’s A2 credit rating and stable outlook, according to Jaime Reusche, an assistant vice president at Moody’s Investors Service in New York.
“Future economic performance will be a key element in determining whether there will be further fiscal slippage that could pressure the government’s stable credit outlook,” he said in an e-mailed statement today.