By Yon Pulkrabek and Ewa Krukowska
Nov. 29 (Bloomberg) -- The Polish zloty posted a fourth monthly decline against the euro after the economy grew at the slowest pace in almost three years. The Turkish lira advanced this week versus the dollar as the country moved closer to a loan agreement with the International Monetary Fund.
Polish gross domestic product rose 4.8 percent in the third quarter, the least since December 2005, compared with 5.8 percent in the previous three months. The global credit crisis is causing growth to slow across eastern Europe, reducing the allure of its assets.
“It’s definitely slowing and the moves in the currency reflect the market’s views on the region in general,” said Nigel Rendell, senior emerging-markets currency strategist at RBC Capital Markets, the investment-banking arm of Royal Bank of Canada. “I’d be a seller of the zloty.”
Poland’s currency fell 0.2 percent to 3.7681 per euro yesterday in Warsaw, paring a weekly gain to 2.5 percent. It dropped 6.2 percent this month. The zloty will decline to 3.85 per euro by the end of 2009, Rendell said.
“While the headline GDP was quite good, the speed of the decline in investment is worrying and shows our 2009 growth forecast of 3 percent might be at risk, underscoring the need for lower interest rates,” Mateusz Szczurek, chief economist at ING in Warsaw, wrote in a client note yesterday.
In other trading, the lira was at 1.5750 per dollar yesterday in Istanbul, from 1.5725 on Nov. 27. The weekly advance pared a monthly loss to 2.3 percent. Earlier yesterday, the currency rose to the highest level in more than two weeks, buoyed by speculation an agreement with the International Monetary Fund on an 18-month loan was imminent.
IMF Progress
Talks with the IMF on a new loan have made good progress and an agreement can be expected in December, the Istanbul-based Referans newspaper reported yesterday, citing unidentified officials.
Economy Minister Mehmet Simsek said Nov. 27 talks with the fund are at an “advanced stage.” The IMF is demanding “significant fiscal adjustments” from Turkey and agreement will depend on whether the country can “persuade” the fund in some areas, he said.
“An IMF stand-by program backed by a solid financing arrangement could help improve sentiment and provide support to asset prices,” Ahmet Akarli, an economist at Goldman Sachs Group Inc. in London, wrote in a research note e-mailed yesterday.
The Romanian leu strengthened 1.1 percent to 3.7898 per euro, reducing its monthly decline to about 3.2 percent, as the country prepares for parliamentary elections on Nov. 30.
Romanian Election
The Romanian Social Democrats, led by former communists, may win the most votes in the election by promising increased social benefits as the global financial crisis threatens job losses and economic stagnation, opinion polls show.
The Czech koruna fell 0.7 percent to 25.389 per euro, retreating 5.4 percent since the end of October.
Goldman Sachs lowered its economic-growth and interest-rate forecasts for Poland and the Czech Republic, citing weakening demand for their exports and tightening credit markets, according to its research note.
The Hungarian forint advanced 0.3 percent to 259.72 per euro, paring a monthly drop to 1.4 percent.
To contact the reporters on this story: Yon Pulkrabek in Prague at ypulkrabek@bloomberg.net; Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
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