East European Currencies: Zloty Gains Most Since 2000 on Stocks

By Ewa Krukowska

Oct. 28 (Bloomberg) -- The zloty rose by the most in more than eight years against the euro as stocks rebounded and Poland's government said it will seek to adopt the single European currency at the start of 2012. Hungary's forint gained for a fourth day.

The zloty rallied from a four-day low as the benchmark WIG20 Index of stocks climbed the most in a week, gaining with other European markets. Prime Minister Donald Tusk told a news conference in Warsaw that Poland may satisfy all euro-adoption criteria by the end of 2011. The cabinet will meet with President Lech Kaczynski today to discuss the euro-entry prospects and the economic effect of the global financial crisis.

``Risk appetite toward the region is improving and the increase in stocks is helping currencies,'' said Maja Goettig, chief economist in Warsaw at Bank BPH, a unit of General Electric Co. ``The talks on Poland's plans to adopt the euro are also supporting the zloty.''

The zloty rose as much as 4.2 percent to 3.6941 per euro, the biggest intraday gain since May 2000, and was up 3.5 percent by 1 p.m. in Warsaw. It fell 13 percent in the past two months as investors shunned emerging-market assets on concern the global credit crisis will raise debt-servicing costs for developing nations.

The NTX Index of the 30 largest publicly traded companies in central and eastern Europe rose 5 percent today, snapping four days of losses. The Dow Jones Stoxx 600 Index gained 2.1 percent.

The adoption of the European Union's currency is of ``key significance'' to Poland, Deputy Prime Minister Grzegorz Schetyna told non-state owned broadcaster TVN24 today.

Referendum

The government will consider a referendum on the date of the euro-area entry before locking the zloty in the Exchange Rate Mechanism known as ERM-2, he said.

A vote on the euro-adoption date is a key demand of the main opposition party Law & Justice. Tusk's ruling coalition, which has 240 votes in the 460-seat assembly, needs the opposition's backing to pass a constitutional amendment allowing the nation to change currencies.

The government expects the zloty to enter ERM-2 in the spring of 2009, TVN CNBC reported, without saying where it got the information. Poland will have to spend at least two years in the currency system, in which the zloty will be allowed to trade within a band against the euro.

In other trading, the forint rose 3 percent to 262.97 per euro after the European Union said it's preparing a financial-aid package to help Hungary weather the credit crisis. The EU ``is preparing to grant financial assistance to Hungary,'' Amelia Torres, a spokeswoman for EU Economic and Monetary Affairs Commissioner Joaquin Almunia told a press conference in Brussels.

Hungarian Measures

Hungary has lined up help from the International Monetary Fund and the European Central Bank to help stabilize financial markets after stocks, bonds and the forint plunged in the past two weeks on concern about the country's ability to finance its current-account and budget deficits as global credit dried up.

The government lowered its economic-growth estimate for next year for a second time this month, and is considering the possibility of negative growth, Finance Minister Janos Veres said today in an interview with public television M1.

In other trading, the Turkish lira gained 4.9 percent to 1.5505 per dollar, from 1.6300 yesterday, and the Romanian leu was little changed at 3.7196 per euro.

The Czech koruna rose 1.8 percent to 24.257 versus the euro as local markets were closed for a public holiday. The Slovak koruna advanced 0.1 percent to 30.480 per euro as the central bank cut its main rate by half a percentage point to 3.75 percent.

To contact the reporters on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net