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Weekly Currency Brief

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11

2

Historical peaks defended

Fri, Feb 20 2009, 15:16 GMT
by Przemysław Kwiecień

X-Trade Brokers, XTB

Last week brought about an extreme volatility on the Polish currency market. We saw as many as four tests of the historical, 5 years old peak on the EURPLN and a sharp corrective move afterwards. There was also a lot of talk about intervention by the government, often causing a confusion. One needs to notice that bearish articles in the financial press in the Western Europe didn’t help to improve the sentiment, even though they were not extremely innovative (like finding that Poland runs a current account deficit). The week started from the sharp selloff of the Polish zloty sending the EURPLN from previous Friday’s 4,63 to as high as 4,9260 on Tuesday. This is just a notch lower than the all time maximum from February 2004 and this level proved to be a forceful resistance, sparking a correction. The move downwards was very sharp either, partly reflecting a declaration from the Prime Minister, that the government might sell some Euros from the EU funds on the market (and the actual sale on Wednesday). It needs to be clarified that the action does not constitute a typical fx intervention. Since Poland is a net beneficiary of EU transfers, the net inflow is generated and there is no reason for the Ministry of Finance not to exchange it on the market. As such, it has short term implications but does not decide on the long-term trend on the EURPLN (although fast utilization of the funds would be a strong argument for the zloty’s appreciation). The correction had a range of 29 figures, nearly the same as in the case of previous two major moves this year. With a poor sentiment on the major stock markets and falling EURUSD we are far from saying that the trend is over. At the end of the week the zloty was losing again and traded at 4,74 against the euro and 3,75 against the dollar. The key resistance on the EURPLN remains at 4,9260-4,94 and the support at 4,62-4,6340.

Published on  Fri, Feb 20 2009, 15:17 GMT