Zloty Gains Most Among Peers as Minister Downplays Credit Threat

  • Deputy PM says has `no clear signal' Moody's may cut A2 level
  • Bonds and stocks gain ahead of new credit assessment on Friday

The Polish zloty gained the most in emerging markets and bonds rose as a deputy prime minister said the government hasn’t received any signals Moody’s Investors Service will cut the country’s debt rating on Friday.

The currency advanced 0.3 percent to 4.4191 per euro as of 1:20 p.m. in Warsaw, ending five straight days of losses, after deputy Prime Minister Mateusz Morawiecki on Monday downplayed talk of a downgrade. The yield on 10-year government debt fell 2 basis points while the WIG20 stock index gained 0.3 percent.

The zloty has tumbled the most among eastern European currencies since Moody’s warned on April 4 that heightened political risk in Poland was “credit negative.” A cut from the current A2 rating by Moody’s won’t be “heart-breaking and won’t be an end of the world,” Morawiecki said in an interview with TVN24, adding that Poland is winning investment and the economy is strong.

“Morawiecki’s comments helped the zloty recover after recent losses,” Piotr Matys, strategist for emerging-market currencies at Rabobank in London. “Nevertheless, the zloty’s potential to appreciate will be limited until Moody’s revision.”

The government isn’t worried when the zloty trades in a range of 4.2-4.5 per euro, Morawiecki said. S&P Global Markets on Jan. 15 unexpectedly cut its rating one notch to BBB+, the third-lowest investment grade, citing a series of measures from Poland’s new government that "weaken the independence and effectiveness of key institutions." The zloty fell the most since September 2011 and bonds tumbled after S&P’s report.

Poland’s five-month-old government grabbed its first high-profile foreign-investment deal last week with Daimler’s Mercedes-Benz pledging to spend about 500 million euros ($574 million) to build an engine factory in the east European country. German factory orders picked up in March to the strongest since June last year, according to data released today, showing the largest European Union economy and biggest trading partner for Poland is gaining momentum.

Since winning elections in October, the government led by Prime Minister Beata Szydlo’s Law & Justice party pushed to overhaul the constitutional court and public media, moves that also drew criticism from the European Commission.

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