Zloty Gains 1st Day Since Central Bank Intervened: Warsaw Mover

The zloty strengthened for the first time since the central bank sold foreign currencies in the spot market last week.

Poland’s currency appreciated 0.3 percent to 4.2544 against the euro at 2:07 p.m. in Warsaw, gaining the first day in three. The relative strength index for euro-zloty pair rose to 72 on June 6, a day before the central bank intervened. A level above 70 indicates to some analysts the zloty is oversold relative to the euro and poised to rebound. The RSI fell to 56 today.

“The sell-off was overdone,” Christian Lawrence, a London-based foreign exchange strategist at Rabobank International, said in an e-mailed response to Bloomberg questions. “When you see moves that sharp and fast, some profit taking is natural, plus central banks have stepped in with talk of intervention in Poland, Indonesia and Turkey.”

The Narodowy Bank Polski sold an undisclosed amount of foreign currencies on June 7 to curb volatility, Governor Marek Belka said on that day. The central bank continues to monitor the situation and can only influence market in periods of instability, management board member Andrzej Raczko said yesterday.

The zloty’s three-month historical volatility jumped above 7.5 percent yesterday from 5.2 percent on May 28, while its implied volatility for the next three months is at 8.7 percent today, according to data compiled by Bloomberg. The central bank could intervene again “to curb volatility if we see a sharp sell-off,” according to Rabobank’s Lawrence.

Yields Drop

The government’s two-year bond yields dropped 11 basis points, or 0.11 percentage point, to 2.83 percent before the release of inflation data tomorrow. The rate of price increases will probably stay unchanged at a seven-year low of 0.8 percent annualized in May, according to the median estimate of 36 economists in a Bloomberg survey.

“The second half of the year will bring a rebound in inflation,” Bank Zachodni WBK SA economists led by Maciej Reluga wrote in a monthly report published today. They expect the Monetary Policy Council to cut interest rates one last time by 25 basis points in July as the beginning of an upward trend in inflation “should prevent” the panel from lowering rates further, the economists said.

Before it's here, it's on the Bloomberg Terminal.