Zloty Rallies as SocGen Sees Polish Political Risks Exaggerated

  • Currency may gain to 4.07 per euro by end of year: SocGen
  • Appreciation is strongest in emerging markets on Friday

The zloty rallied the most in emerging markets on Friday amid ebbing concern the populist policies of this week’s election victor will dent Polish assets.

The currency gained 0.7 percent to 4.2520 per euro by 5:27 p.m. in Warsaw, the strongest advance among 24 developing-nation currencies tracked by Bloomberg. Societe Generale SA sees the zloty climbing a further 4.5 percent to 4.07 by the end of the year, a level last seen in May. Commerzbank AG predicted it will appreciate to 4.15 per euro as investors continue pricing out political risk.

The zloty halted its declines on Thursday as comments by the top economic adviser to Polish President Andrzej Duda tempered expectations for an aggressive monetary-policy overhaul. The currency was battered in the run up to the vote as the incoming Law & Justice party pledged to tax banks and convert foreign-currency loans. Even after Friday’s rebound, the zloty was still the third-worst performer among its emerging-market peers for October.

"There’s massive buying interest from investors showing that election skepticism might be over-hyped," Bernd Berg, a foreign-currency strategist at Societe Generale in London, said by e-mail. The rally will gather pace as European Central Bank stimulus drives inflows into Polish bonds and as investors exit bets that the currency will fall, he said.

Economic output in the European Union’s largest eastern member will probably expand by 3.5 percent in 2015 and in 2016, the fastest pace in four years, according to a Bloomberg survey of 42 analysts.

"There’s more clarity on how the government is going to proceed and it seems the country won’t go in a radical direction," said Esther Reichelt, a foreign-currency strategist at Commerzbank AG in Frankfurt. “The market has calmed down and is focusing more on fundamentals."

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