East European Currencies: Zloty Rises as Growth Beats Forecasts

By Ewa Krukowska

Aug. 29 (Bloomberg) -- Poland's zloty rose against the euro, paring a monthly decline, after a government report showed economic expansion in the second quarter exceeded forecasts. The Hungarian forint also gained.

The zloty snapped a five-day loss after Poland's statistical office said the economy grew 5.8 percent, compared with 6.1 percent in the first quarter. That was above the 5.6 percent median forecast in a Bloomberg News survey. The zloty logged its first monthly drop since March on concern a global economic slowdown will spread to eastern European economies this year.

``Leading indicators suggest the second half of 2009 will be more challenging, but the Polish economy proved it remains resilient to the global slowdown,'' said Bartosz Pawlowski, a strategist at TD Securities in London. ``The zloty should find support on the better-than-expected net exports performance, and the bond market is likely to reconsider its quite aggressive rate-cut expectations.''

The zloty climbed as much as 0.8 percent to 3.3288 per euro, and was at 3.3329 by 3:53 p.m. in Warsaw, from 3.3542 yesterday, paring its decline this past month to 3.9 percent. It is the worst emerging-markets currency in August as traders scaled back bets for an increase in interest rates from 6 percent.

Central banker Halina Wasilewska-Trenkner said second- quarter growth figures were better than expected and provide ``ammunition'' for raising interest rates. Fellow policy maker Dariusz Filar reiterated one or two increases in borrowing costs were needed to curb inflation.

The yield on the zero-coupon two-year government note due July 2010 fell 6 basis points to 6.32 percent. Bond yields move inversely to prices.

Forint Gains

In other trading, the Hungarian forint rose 0.9 percent to 236.65 per euro, paring its first monthly loss since February to 1.1 percent. The currency slipped in August after Prime Minister Ferenc Gyurcsany told state radio Aug. 27 he would resign if lawmakers don't approve his 2009 budget proposals.

Hungary's government wants to cut taxes by as much as 1.2 trillion forint ($100 million) in the next four years to spur the weakest economic growth since 1993 last year.

The Romanian leu was at 3.5385 per euro, from 3.5284 a week ago, paring a second month of gains to 0.3 percent, while Turkey's lira logged a weekly advance, rising to 1.1822 per dollar and extending a second monthly gain to 1.5 percent.

The Czech koruna was little changed at 24.735 per euro, having lost 3.3 percent this month.

Czech central bank Governor Zdenek Tuma said the koruna's strength will ``take its toll'' in the next six to 12 months in the shape of a deteriorating trade balance and slackening economic growth, Hospodarske Noviny reported today.

The Slovak koruna was little changed in the week at 30.325 per euro. Slovakia will join the euro area at the start of 2009.

To contact the reporter on this story: Ewa Krukowska at ekrukowska@bloomberg.net