East European Currencies: Poland's Zloty Drops Against Euro

By Ewa Krukowska and Yon Pulkrabek

Aug. 19 (Bloomberg) -- Poland's zloty fell against the euro as stock-market losses sapped investors' appetite for emerging- market assets. The Czech koruna also declined.

The zloty is the worst emerging-market performer this month as investors cut their holdings of higher-yielding currencies and purchased U.S. dollars on concern economic growth in Europe is contracting. The euro dropped to a six-month low against the dollar earlier today and the NTX Index of the 30 largest publicly traded companies in central and eastern Europe fell to its lowest level in a month.

``A stronger dollar means a weaker zloty,'' said Jaroslaw Janecki, chief economist at Societe Generale in Warsaw. ``Economic data from the European Union show it may be nearing a recession, while news from the U.S. is more positive. This reduces risk appetite for our region.''

The zloty declined 0.4 percent to 3.3274 per euro by 3:22 p.m. in Budapest, from 3.3144 yesterday, extending its decline this month to 3.9 percent.

The NTX Index fell 1.9 percent to 1610.85, headed for its lowest close since July 15. Bourses tracked lower in Bucharest, Budapest, Prague and Warsaw as well.

The zloty is ``too strong'' and it's a ``serious threat'' for Polish companies, the Polish Chamber of Commerce said. ``The strong zloty harmed exporters and reduced inflows from the EU,'' the chamber said in Warsaw today.

The Czech koruna dropped from its highest level in two months, losing 0.7 percent to 24.438 per euro, while the Romanian leu was little changed at 3.5242 versus the euro, as was the Slovak koruna at 30.314.

Turkish Pressures

Turkey's lira lost 0.6 percent to 1.1965 per dollar, and slipped 0.2 percent to 1.7523 against the euro. The impact of the global credit crunch on Turkey will worsen in the months ahead, Vatan newspaper reported, citing Economy Minister Mehmet Simsek.

Hungary's forint was little changed at 236.12 per euro after a report showed the average monthly gross wage increased in June to an annual 9.7 percent, from 9.6 percent a month earlier, the Budapest-based statistics office said today. Wages were expected to rise 8 percent, according to the median estimate of seven economists in a Bloomberg survey.

The National Bank of Hungary earlier this year said accelerating wage growth signaled rising inflation expectations at a time when government austerity measures are curbing corporate profits. Policy makers have raised interest rates by 1 percentage point this year to 8.5 percent.

``The significant increase in the headline figure was due to higher bonus payments in June at several big financial institutions,'' Gyula Toth, an economist at UniCredit MIB in Vienna, wrote in a research note today. ``We expect the NBH to keep rates on hold at the August meeting and see scope for the start of the easing cycle in the fourth quarter.''

To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net; Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net