FINANCE & ECONOMICS
AUGUST 22 – SEPTEMBER 4, 2011
www.wbj.pl
9
Currencies
Is now the time to invest in the z∏oty? 4.25
*August average through 17.08
4.00
Au gu st 20 11*
y2 01 1 Jul
Jun e2 01 1
1
y2 01 1 Ma
20 1 ril Ap
rch Ma
bru a
ry
20 11
20 11
20 11
3.75
Source: National Bank of Poland
is cheap compared with fundamentals,” the bank’s chief analyst Lars Christensen said in the statement. The z∏oty stood at 4.19
against the euro as WBJ went to press. So, is now a good time to invest in the z∏oty? Experts that spoke with
WBJ were cautious. “It is very difficult for us to predict whether now is the correct time to look for other currencies such as the z∏oty,” said Tomasz Bursa, an analyst at Ipopema Securities in Warsaw, who mooted the possibility of further weakening. “There could definitely be a depreciation of the z∏oty.” Pawe∏ Kordala of X-Trade Brokers echoed this opinion, saying investors should wait to assess the position of the currency, as its current weakness could hold. “The volatility of the markets is quite large at the current time and it’s not easy to predict the future,” he said. “That the Polish currency will decline is quite proba-
to buy z∏oty, I would wait a few weeks before investing,” he added.
ble. The [negative] sentiment on the financial markets could lead to the sell-off of risky assets such as the z∏oty. And if I were planning
David Ingham, Alice Trudelle
SHUTTERSTOCK
EUR/PLN exchange rate, average at the end of each month*
Fe
The roller-coaster ride that the markets have been on of late has sent investors scurrying from currencies that are perceived as “risky” such as the z∏oty. Although it has pulled back from some of the lows it hit in mid-August, the z∏oty is still far weaker than it was earlier in the year. The situation came to a head on August 11, when the z∏oty-euro exchange rate reached as high as z∏.4.20. At that point Danske Bank issued a statement saying that the rate was unjustified, explaining that it was an “overreaction” by the markets. “We argue that the z∏oty
Steep climb
Jan ua ry
WBJ asked analysts whether the Polish currency is a good buy
Is it time for investors to take a closer look at the z∏oty?
Inflation
Interest rates likely to remain stable, RPP says The National Bank of Poland's main interest rate, July 2010-July 2011 5
4
01 1 r. 2 01 1 Ma y2 01 1 Jun .2 01 1 Jul .2 01 1
1
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r. 2
Ma
Feb .2
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Jan .
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01 v. 2
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20 1 p.
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Although economists were worried just a few weeks ago about Poland’s rocketing inflation rate and theorizing that central bankers would continue to raise interest rates to head it off, global economic factors have changed the longer term outlook significantly. A jittery global economy along with slowing GDP growth rates in Europe now look to be taking a bite out of inflation growth.
Steady climb
20 10
Signs of a slowdown
Poland’s largest trading partner, Germany, saw a particularly sharp second-quarter slowdown, with its economy growing just 0.1 percent q/q. Indeed, factors had changed so dramatically that Danske Bank, which had previously predicted at least one more interest-rate hike this year, changed its prediction and now believes that the RPP will cut interest rates by a total of 50 basis points within the next 12 months. “Given the sharp deterioration in the global financial situation and downward pressure on commodity prices we no longer see major upside
g.
the same time inflation will remain above the central bank’s target of 2.5 percent.
Au
Indications from Poland’s rate-setting Monetary Policy Council (RPP) suggest it will keep interest rates stable in the near future, despite signs economic and inflationary growth rates are decelerating. RPP member Andrzej Kaêmierczak said recently that inflation was still too high, and that current interest rates were likely to be maintained in the near future. The RPP raised the headline interest rate by a total of one percentage point, to 4.5
percent, between January and June this year. “Inflation would have to fall clearly below 4 percent yearon-year to make interest rate cuts possible,” Mr Kaêmierczak said in late August. Poland’s inflation rate slowed in July on lower food prices, growing 4.1 percent y/y, from 4.2 percent in June and 5 percent in May. According to analysts at BZ WBK, inflation will stay above 4 percent for the reminder of the year, which would put the RPP in a rather uncomfortable position – the outlook for economic growth will likely deteriorate and at
Jul .
That’s despite evidence inflationary pressures are easing
Source: National Bank of Poland
inflationary risks in Poland and hence, we have decided to change our forecast,” Danske Bank’s chief analyst
Lars Christensen wrote in a report. Gareth Price, Andrew Kureth