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Weekly Currency Brief

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Złoty tumbles on Friday

Fri, Mar 27 2009, 15:14 GMT
by Adam Narczewski

X-Trade Brokers, XTB

Investors worldwide were waiting for a long time for such good macroeconomic news. On Monday, Timothy Geithner, U.S Secretary of the Treasury reveled the plan to help financial institutions by re-buying “toxic” investments with government and private capital. In his speech, Geithner revealed many more details about the rescue plan than in his last speech causing equity markets to shoot up. More to that, reports from the American economy were better than expected and those included new and existing home sales (increase by 5.1% and 4.7% m/m respectively). It is difficult to say if the real estate market in the U.S is rebounding but there are signs that it might recover soon. For a short time, belief in the strength of the U.S dollar returned on the markets. On Friday, the situation changed, with investor cashing in their profits causing equity markets to tumbled. The EUR/USD stopped climbing after reaching $1.3740, and after breaking an important support level at $1.3415 finished the week at $1.33.

In Poland, the “big” news was the Monetary Policy Council’s decision to cut interest rates by 25 basis points to 3.75%, the lowest level in history. There was almost no reaction on the Złoty market since the decision was expected and discounted by market participants. During the whole week the Złoty remained stable and moved in a horizontal trend. The end of the week brought big changes. Increased risk aversion and the Eurodollar drop, caused a really quick decline of the polish currency. Throughout the whole week the EUR/PLN advanced from zł.4.5230 to zł.4.6230, the USD/PLN from zł.3.3170 to zł.3.4740 and the CHF/PLN from zł.2.9520 to zł.3.0330.

Published on  Fri, Mar 27 2009, 15:16 GMT