The euro exchange rate broke the PLN 4.60 level on Wednesday. The Polish currency has been the weakest since March, i.e. the height of panic in the financial markets due to the third wave of the covid -19 pandemic.

Our currency in recent days is one of the weakest among emerging market countries. This is partly at the request of the NBP.

The National Bank of Poland increased the scale of structural open market operations on Wednesday in order to lower the yield on government bonds, which has increased significantly in recent weeks. The loosening of monetary policy was one of the factors that pushed the euro to its highest level since October. The Polish central bank was concerned that easing the monetary policy behind the Oder with unchanged monetary policy on the Vistula River would lead to an appreciation of the Zloty, which NBP considers undesirable.

The Polish currency is also depreciating against the dollar too. The U.S. currency on Wednesday morning had to be paid as much as PLN 3.92, compared to 3.89 on Tuesday evening.

As they explain, the zloty depreciation is caused by the deteriorating sentiments in the financial markets in connection with the development of the pandemic, which prompts other countries to introduce restrictions on economic activity. In some countries, such as France, even a temporary “lockdown” similar to that in spring this year is taken into account.

In the conditions of growing risk aversion, investors redirect capital towards the so-called safe assets. As a result, the dollar, franc or bonds of core markets are gaining in value. On the other hand, stock markets are losing Central and Eastern European currencies.

The relatively weak reaction of the bond market to the loosening of monetary policy by the NBP suggests that it is not the only factor responsible for the weakening of zloty. Another is worsening epidemic to which the Polish government responded by announcing tightening of restrictions.

The attitude of the NBP partially explains why the zloty is perceived as a risky currency. Among the currencies of the so-called in emerging markets, we can see more and more differences in behaviour. Where central banks talk about rate hikes this year-e.g. in the Czech Republic, Russia or Brazil- we have a rebound and relative strength, while Where central banks are more inclined to tolerate inflation and their readiness to tighten monetary policy is lower, currency weakness does not stop.

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