(Bloomberg) -- Poland’s zloty traded near the strongest level against the euro since early 2020 on bets for further restrictive monetary policy at home and hopes for a less disruptive second term from US President-elect Donald Trump for emerging-market assets.
The zloty briefly touched the highest level in nearly five years on Monday in light trade as local markets were shut for a holiday. It gained 0.1% to trade at 4.2515 against the euro as of 11:36 a.m. in Warsaw Tuesday.
Poland’s currency has advanced as much as 2.6% since early November as the country’s central bank turned more hawkish, with Governor Adam Glapinski not expecting interest rate cuts until 2026. Furthermore, sentiment for riskier assets has been lifted by hopes that Trump won’t impose tariffs on European Union goods to a scale that was earlier suggested, though he sought to play down such speculation.
The latest moves “open the way for further strengthening of the zloty,” said ING Bank Slaski SA economists led by Rafal Benecki. More gains will hinge on “clarification whether the unpredictable Trump will turn to a more common sense approach and will pursue a policy that is less aggressive than announced in the campaign,” the ING analysts added.
Economists at Bank Pekao SA including Ernest Pytlarczyk said further gains would require “additional arguments,” such as negative inflation surprises which would help keep Polish rates higher for longer. But with the latest consumer price readout coming in a touch softer than consensus, they expect the zloty to “retreat to a slightly higher level in the coming days and wait for further signals in macro data.”
Grzegorz Maliszewski, chief economist at Bank Millennium SA, said the declining prospects for rate cuts in Poland help make the zloty a “standout” among East European peers, such as the forint and koruna. Hungary’s currency hit a fresh two-year low overnight, before rebounding slightly on Tuesday.
Options data collected by Bloomberg shows a 49% chance of the zloty touching 4.2 per euro by the end of March and a 6% probability of the Polish currency breaching 4.1 during the period.
--With assistance from Agnieszka Barteczko.
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