The zloty is one of the world’s weakest currencies. Here’s what could happen next

In relation to the dollar, the zloty was the lowest on Monday in almost five years, against the euro – for almost 12 years, the pound – for five years, and the Swiss franc – for seven years. There are few currencies in the world weaker than the Polish one. The fluctuations are strong for several reasons. Forecasts of currency analysts say, however, that it is temporary and the market will still return to the zloty, although it will certainly be nervous.

  • Although most of the currencies of developing countries have recently fallen on the wave of dollar appreciation, there are few currencies that would weaken more than the zloty
  • Analysts point to a combination of many events at once. One of these events was to be an interview with the NBP president for PAP Biznes
  • Analysts’ forecasts indicate that the exchange rate is detached from the economy and that after a short turmoil, we will see a strengthening of the zloty
  • More such information can be found on the main page of Onet.pl

The current turmoil on the currency market is the effect of the dollar strengthening. Against the dollar the level of PLN 4.18 was raised on Monday, not seen since January 2017. On Monday, the zloty lost 0.4 percent to the US currency, during the week it lost 2.2 percent, and from the beginning of the year already 11.7 percent.

This is a consequence of inflation, which accelerated in the US to as much as 6.2 percent. in October (CPI). These levels were last observed in November 1990. Why is the dollar strengthening while inflation is rising? Theoretically, it should be the other way around, but this is where the central bank effect is at work.

With inflation going up, the market is assuming that now the Fed has no other way but to deviate from loose monetary policy and raise interest rates. The quotes of futures on the Chicago Stock Exchange give almost 4 percent. the chance that the first increase will take place in January next year, 24 percent. there is a chance that it will be in March, but already 49.4 percent, that it will be May 2022. The fact that it will happen in June at the latest is already taken for granted on the market.

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– Currently, most emerging market currencies are depreciating against the USD and EUR. Moods worsen by disturbing news on the subject the number of new cases of Covid-19 in Europe. Markets fear a lockdown again. Investors are fleeing to the safe haven of the United States – comments Mariusz Zielonka from Lewiatan.

Euro above 4.70 PLN

After fluctuating once downwards, once upwards against the euro, the zloty finally remained at Friday’s level on Monday. But there was a moment when it broke the PLN 4.72 level, which has not happened since March 2009.

Due to close trade ties with the euro area, the zloty usually does not change to a large extent in relation to the common currency. Temporary hesitation on Monday could have resulted from too strong reaction to a series of unfavorable events, combined with the interpretation of Friday’s statement by President Glapiński. Peace returned after the declaration of Prime Minister Morawiecki.

Pound and Franc

In relation to the pound, the zloty on Monday exceeded the level of PLN 5.60 and was the weakest since June 2016, and to the Swiss franc – over PLN 4.50, i.e. the worst since the unlucky January 2015.

The weakening against the pound certainly does not encourage Poles to return from British emigration. On the other hand, the high exchange rate of the franc made the frankers’ installments go up.

The zloty among the weakest currencies in the world

Brazilian real, Argentinian peso, Hungarian forint, South African rand, Turkish lira, Swedish and Norwegian koruna and Korean won – these are some of the few currencies in the world against which the zloty did not record the lowest exchange rate in a year in the last week. Why is the market overestimating the rate of our currency so much?

About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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