Poland: Polish zloty weakens, triggering Central Bank intervention
September 30, 2011
On 30 September, the Polish zloty (PLN) traded at 4.41 per EUR, which represented a 6.0% nominal depreciation compared with the previous month, the biggest loss since December 2008. On a year-on-year basis, the zloty depreciated 9.6% versus the EUR. The zloty weakened even more versus the USD in nominal terms, depreciating 11.9% over the previous month and 10.2% over the same month last year. The sharp currency depreciation prompted the National Bank of Poland (NBP) to intervene in the FX market on 23 September. According to the NBP's laconic press release statement, the Bank ?sold a certain amount of foreign currency for zlotys.? This was the Central Bank's first intervention since 9 April 2010, when it attempted to curb the zloty's appreciation by selling it on the foreign exchange markets. A weaker zloty is viewed negatively by the policy makers, as continuing decline in value of the domestic currency could push public debt above the legal debt-to-GDP threshold of 55% of GDP, and thereby trigger mandatory austerity measures.