Zloty Strengthens as Bonds Rebound From Worst Slump Since 2008
Poland’s currency and bonds gained after tumbling yesterday in response to the Federal Reserve announcing it may end to its unprecedented asset purchase program in about a year.
The zloty appreciated 0.5 percent to 4.3183 against the euro at 12:25 p.m. in Warsaw, rebounding from a one-year low reached after a 1.8 percent slide yesterday. It is the best performer among Europe’s emerging markets currencies, according to data compiled by Bloomberg. The yields on 10-year bonds fell seven basis points, or 0.07 percentage point, to 4.19 percent, paring yesterday’s 40 basis-point jump, the biggest daily increase since October 2008, data compiled by Bloomberg show.
“A rebound is possible in the short run as the increase in yields was dramatically fast, but after this technical correction we expect a further decline in bond prices and a weakening of the zloty,” ING Bank Slaski SA’s Warsaw-based economists, led by Rafal Benecki, wrote in a note today.
The Fed may taper its monthly purchases of $85 billion in assets later this year and halt them around mid-2014 as long as the world’s largest economy performs in line with its projections, Fed Chairman Ben S. Bernanke said two days ago, sparking a global sell-off in assets. Poland has one of the most-liquid markets among developing countries, making it an “easy point of exit” when sentiment sours, Phoenix Kalen, a London-based economist at Royal Bank of Scotland Group Plc, said by e-mail yesterday.
The zloty is at risk of a further sell-off as “the near-term outlook” for currencies in Europe, the Middle East and Africa “is far from rosy,” Christin Tuxen, a senior analyst at Danske Bank A/S (DANSKE) in Copenhagen, wrote in a note today.
The cost to insure Polish debt against non-payment for five years using credit-default swaps rose one basis point to a two-month high of 96, data compiled by Bloomberg show. That compares with 131 for Israel, 120 for Chile and 64 for the Czech Republic, the data show.
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