The Polish zloty posted modest gains making the zloty’s exchange rate less volatile. This is due to the Polish government buying Polish zloty with euros received in European Union subsidies stated by the central bank Governor Marek Belka.
The Finance Ministry announced in April it would exchange as much as 14 billion euros ($20.4 billion) in EU funds on the market this year to reduce fluctuations in the exchange rate and absorb liquidity on the interbank market.
“The scale of over-liquidity has been limited,” Belka said today at a press conference in Warsaw after the Monetary Policy Council raise interest rates for the fourth time this year. It’s still “too early” to assess the effect of the euro- sale policy, he said.
Today, markets will undoubtedly focus on this week’s eye-catcher, which is the above mentioned announcement of the MPC rate decision. This time, the MPC meeting is accompanied by the discussion on a new inflation report, which will take into account surprisingly high rate of inflation. As we said earlier, we think that another 25 bps rate hike hangs in the air. Such a decision should, at least in a short-term, play in favor of the Polish currency
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