Zloty May Rise Versus Euro as Risk Appetite Returns, BPH Says

By Ewa Krukowska

Oct. 14 (Bloomberg) -- The Polish zloty may strengthen to 3.45 against the euro this week as government rescues of banks in Europe and the U.S. revive appetite for riskier, emerging-market assets, said Maja Goettig at Bank BPH.

Gains will be boosted by measures in Poland to support domestic banks, scheduled to be announced today, according to central bank Governor Slawomir Skrzypek. The zloty climbed as much as 2 percent to 3.4650 per euro, from 3.5341 yesterday and 3.5755 at the end of last week, when it slid the most since the debut of the European common currency in 1999.

``The European package yesterday and plans to boost confidence by governments across the globe helps to improve risk appetite,'' said Goettig, senior economist in Warsaw at Bank BPH, a unit of General Electric Co. ``We also have the Polish central bank preparing its package. This all supports the zloty.''

The zloty is still the third-worst performer versus the euro during the past three months as the turmoil sparked by the U.S. subprime mortgage crisis spread to Europe, sapping investor demand for emerging-markets assets.

European and U.S. governments may spend $3 trillion to unfreeze credit markets, meet demand for dollars and shore up banks. The European Central Bank, the Bank of England and the Swiss National Bank will offer European banks unlimited dollar funds with maturities of seven days, 28 days and 84 days at fixed interest rates against ``appropriate collateral,'' the U.S. Federal Reserve said yesterday.

The Polish central bank's Monetary Policy Council announced late yesterday it will allow currency swaps to preserve liquidity.

The zloty may strengthen to 3.40 per euro by the end of the year, according to a Bloomberg survey of economists.

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