Zloty Declines With Polish Bonds as Ukraine Crisis Intensifies

The zloty weakened to a three-month low and Polish stocks and bonds fell as NATO said there’s a risk of Russia sending troops into Ukraine under the “pretext” of a humanitarian or peacekeeping mission.

The currency depreciated 0.3 percent to 4.2006 against the euro at 2:38 p.m. in Warsaw, extending a quarterly decline to 1.1 percent. The yield on 10-year zloty bonds rose two basis points to 3.47 percent. The WIG30 stock index slid 0.7 percent.

Eastern European assets are being hit as the standoff over Ukraine escalates in the wake of U.S. and European Union sanctions against Russia. President Vladimir Putin has ordered economic retaliation, while NATO said today there’s a risk of a Russian incursion after at massed soldiers on the border.

“Uncertainty and fear, that’s why long positions in zloty are being closed,” Sebastian Cichy, a currency trader at BNP Paribas SA in Warsaw, said by e-mail today. “Looking at fundamentals, the main concern is exports to Russia, it’s 8 billion euros annually. That would be a significant gap in our trade balance.”

Poland, a NATO member bordering Ukraine and among the EU nations seeking the toughest response to Russia’s policy over Ukraine, has “reason to believe” the risk of an incursion is “greater than a few days ago,” Prime Minister Donald Tusk said today. Russia banned Polish fruit and vegetable imports, including apples and cabbage, as of Aug. 1 in response to European Union sanctions.

The WIG30 dropped for the first day in four, led by JSW SA, the country’s largest producer of coal for making steel, which tumbled 3.9 percent to a record low.

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