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Weekly Currency Brief

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Eureko's dividend low impact?

Fri, Oct 2 2009, 14:14 GMT
by Adam Narczewski

X-Trade Brokers, XTB

This past week’s macroeconomic news did not confirm that the crisis is really gone as Fed’s chairman, Ben Bernanke, was implying. The U.S labor market is still in difficult condition as proved by the ADP and nonfarm payrolls reports (both worse than expected). Other reports (Chicago PMI and ISM-manufacturing) did not help the markets either. The EUR/USD declined along with tumbling stock markets and reached $1.45 at the end of the week, an important support level, from which it can rebound.

The Polish currency followed the global tendency and lost value throughout the course of the week. The Złoty was negatively affected by falling equities markets and the EUR/USD. Risk aversion increased and the expectation of a deeper corrective movement is stronger. The main topic on the local market was PZU’s (largest insurer in Poland, mostly owned by the Ministry of Treasury) dividend. Finally, on Friday, during the general shareholder’s meeting it was decided to pay out a 12,75 billion Złotys dividend. About 4,5 billion will go to Eureko (insurance company from the Netherlands), which holds around 30% of PZU’s stock. Investors were worried that the company will exchange the whole dividend (received in Złotys) on the interbank market. Such transaction could increase volatility and depreciate the Złoty drastically. On Friday afternoon, Eureko’s vicepresident calmed the markets confirming that the company is hedged against any currency fluctuations. In the end it seems that the dividend will not have such a direct impact on the Złoty. The EUR/PLN finishes the week at zł.4.2340 (zł.4.20 on Monday, in the meantime reaching zł.4.29, its highest since July) while the USD/PLN at zł.2.9030 (zł.2.89 on Monday).

Published on  Fri, Oct 2 2009, 14:15 GMT