Wednesday, 08 July 2015 17:34
BUDAPEST/WARSAW: The zloty fell to a 5-month low against the euro on Wednesday ahead of a Polish central bank meeting as fear that Greece may leave the euro zone weighed on Central European markets.
Some central banks in the region are still in their monetary easing cycle, but analysts in a Reuters poll unanimously projected that the Polish bank would keep rates on hold at 1.5 percent.
The zloty still eased by 0.2 percent to 4.221 to the euro, slightly off an early low of 4.228, its weakest level since the end of January.
Central Europe’s most liquid unit which investors use as a proxy for the entire region could remain under pressure until the end of this week, the deadline that euro zone members gave to Greece to come up with reform proposals in return for aid.
“The (Warsaw) bourse’s weakness is not helping us. The recent flows are negative and it’s a system of communicating vessels,” one Warsaw-based dealer said.
The Warsaw bourse’s main index was flat but the stocks of Poland’s biggest lender PKO BP fell 0.9 percent, trading close to its lowest levels since 2011, after a slump on Tuesday.
Polish bank stocks fell sharply, and could remain depressed.
The opposition Law and Justice party, the favourite to win elections in October, proposed a banking tax at 0.39 percent of banks assets on Tuesday.
A further factor of uncertainty in the banking sector is the expectation that the ruling Civic Platform will present a draft law on Wednesday to help troubled Swiss franc loan holders.
A more than 7 percent plunge of the stocks of copper minor KGHM since Friday is also weighing on the Warsaw bourse index as copper prices in the world market have fallen.
Asset prices in the southern part of the region, where the banks of troubled Greece are present, were mixed, but relatively calm.
The dinar firmed slightly against the euro to 120.23, a day before the Serbian central bank’s meeting where it is expected to keep rates on hold instead of cutting them further, due to the worries over the Greek crisis.
Hungarian government bonds were flat or eased slightly even though Tuesday’s announcement by the central bank to launch a 10-year interest rate swap facility could increase local banks’ demand for long-term government bonds.
