Zloty Sinks as Central Banker Says Post-Brexit Slump Acceptable

  • Zloty hits 2-week Low on ‘strange’ MPC comment: Nomura’s Ash
  • Poland seen exposed to Brexit as beneficiary of EU budget

Poland’s zloty weakened to a two-week low after Jerzy Kropiwnicki, a member of the central bank’s Monetary Policy Council, said it would be “acceptable” if the currency tumbled to a record low following a vote for Brexit later this month.

Kropiwnicki said there would be no need for the central bank to intervene on the currency market unless the zloty tumbled to 5 per euro in the aftermath of a vote for the U.K. to leave the European Union. The Polish currency, which plummeted to a record intraday low of 4.93 per euro during the global financial crisis in 2009, dropped 0.8 percent to 4.4123 at 5:47 p.m. in Warsaw, the biggest decline among emerging European currencies on Monday.

“Strange for a central banker to mention levels -- normally not a good idea, unless they want the currency to get to these levels,” Tim Ash, a strategist for Nomura International Plc in London, said by e-mail. “Poland is the most exposed economy in Emerging Europe to Brexit, given the large number of Polish workers in the U.K., the importance of worker remittances to the economy, and support from EU convergence funds.”

The zloty has weakened 3.8 percent against the euro this quarter, the worst performance among 24 emerging-market currencies tracked by Bloomberg following the Malay ringgit and Mexican peso. The decline comes amid concern over Brexit as well as domestic factors such as the government’s conflict over rule of law with the EU and a weak readout of economic growth in the first quarter.

“Policy uncertainty, notably in the relations with the EU, undermines investor confidence and can have detrimental impact on Poland’s potential growth,” Danske Bank A/S analysts said in an e-mailed note on Monday.

Kropiwnicki, who joined the central bank’s 10-member MPC this year, said a weaker zloty would be good for exporters even if a U.K. exit from the EU would be “detrimental” for Poland. He linked the zloty’s recent depreciation to concern that Brexit would take place, rattling emerging-market assets.

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