Zloty to Lira Tumble on German Confidence Slump, Ukraine Tension

Currencies in emerging Europe from Poland’s zloty to Turkey’s lira weakened after German investor confidence dropped to the lowest level since 2012 and tension deepened in the conflict between Russia and Ukraine.

The zloty lost 0.4 percent to 4.2116 against the euro at 1:12 p.m. in Warsaw and 0.7 percent per dollar, the worst performance among 24 emerging-market currencies tracked by Bloomberg. The lira tumbled 0.7 percent per dollar. Russia’s ruble slid 0.6 percent, extending this quarter’s depreciating to 3.5 percent, the biggest drop among developing nations. Ukraine’s hryvnia tumbled 4.3 percent.

German sentiment declined for an eighth month as a sluggish euro-area recovery damps the outlook for Europe’s largest economy, data from the ZEW Center for European Economic Research in Mannheim show. Currencies declined amid concern an escalating crisis in Ukraine and economic slowdown will trigger outflows from eastern Europe.

“The ZEW was pretty horrific,” Ilan Solot, a London-based emerging-market currency strategist at Brown Brothers Harriman, said by phone today. “Expectations were already low and the number was even lower.”

The ZEW index of investor and analyst expectations, which aims to predict economic developments six months in advance, dropped to 8.6 in August from 27.1 in July. Economists forecast a decrease to 17, according to the median of 31 estimates in a Bloomberg News survey.

Russian Convoy

Ukraine won’t let a convoy of 280 trucks that Russia says are carrying humanitarian aid to cross into its territory as it doesn’t adhere to international rules, Ukrainian military spokesman Andriy Lysenko said. The convoy is carrying military gear in the guise of aid and any assistance would only be let in after a Red Cross evaluation that may take a week, he said.

Russia’s Emergencies Ministry said the trucks carrying 2,000 metric tons of donated food, medicine and drinking water left Moscow for areas held by pro-Russian rebels in southeastern Ukraine today.

“The ZEW contributed to the weakening in central and east Europe, but the main reason was the rising fears caused by the convoy,” Piotr Matys, an emerging-markets currency strategist at Rabobank International in London, said by e-mail today. “The ongoing crisis in Ukraine may enter the most dangerous phase yet.”

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