Zloty Weakens From Month-High on Fed Taper Concern: Warsaw Mover

The zloty slid from its highest in a month and Polish government bonds fell as the Federal Reserve begins its two-day policy meeting, adding to concern tapering will result in outflows from emerging-market assets.

The currency depreciated for the first time in three days as investors speculated the Federal Open Market Committee will probably lower its monthly bond purchases to scale back monetary stimulus. It gained 2.6 percent in the third quarter, the second-best performer among 24 emerging-market currencies tracked by Bloomberg after South Korea’s won.

“The zloty outperformance has already run a long way at current levels,” Societe Generale SA’s emerging-market strategists led by Benoit Anne wrote in a note. SocGen recommends selling the zloty in favor of the Czech koruna.

Poland’s currency weakened 0.4 percent to 4.2169 against the euro at 4:24 p.m. in Warsaw, after it breached its 200-day moving average of 4.1897/EUR yesterday, the strongest level since Aug. 13. The yields on 10-year government bonds rose four basis points, or 0.04 percentage point, to 4.44 percent, the first advance in five days.

Poland’s currency is also trading near the 50 percent retracement of the rally from June, one of the levels singled out in Fibonacci analysis, which is based on the theory that prices rise or fall by certain percentages after a high or low.

The Fed will probably cut its $85 billion of monthly debt buying by $10 billion tomorrow, according to the median estimate of 34 economists in a Bloomberg News survey on Sept. 6. The stimulus has helped fuel a rally in assets worldwide, including Polish bonds, as investors sought alternatives to near-zero rates in developed countries.

Wage Growth

“We can see EUR/PLN return to the mid 4.30’s and possibly all the way up to 4.40 in a sharp worsening environment for risk,” Anne, the head of emerging-markets strategy at SocGen, wrote in the note.

The average wage in Poland rose 2 percent from last year in August, the Central Statistical Office said today, missing the 2.8 percent median estimate in a Bloomberg survey of 31 economists. The office will release data on August industrial output tomorrow. Growth in production probably slowed to 2.7 percent annually from 6.3 percent in July, a separate Bloomberg survey shows.

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