WARSAW: Poland's state-owned bank BGK, which is mandated to sell euros for the government under a plan to support the zloty by regularly converting EU funds, sold euros on the spot market on Friday, dealers from two banks said.
It was not clear whether the bank was acting on its own account or for the finance ministry, which announced last week that it would sell some of the funds it receives from the European Union to support monetary policy and curb inflation.
"We see BGK on offers, selling euros," said a dealer at a Warsaw-based bank.
Another dealer confirmed the information, BGK declined to comment.
BGK is present on the spot market as regular participant, but since it is now licensed to sell euros on behalf of the finance ministry, its presence on the market is expected to have a additional psychological effect.
"Any presence of BGK in the coming weeks will raise speculation of whether it's the finance ministry or just BGK as a market player," said a Warsaw-based dealer.
The zloty briefly hit its day-high at around 3.93 to the euro after the bank was seen in the market, but reversed gains and was traded at around 3.9360 by 1223 GMT.
Late last year, the ministry used BGK to sell funds in a move aimed at boosting the zloty to avoid breaching key debt levels. Almost a quarter of Poland's total debt load is held in foreign currencies.
Analysts say the ministry's move to boost the zloty in order to keep a lid on inflation is likely to have a significant short-term effect, but the Monetary Policy Council is still seen raising interest rates later in the year.
Inflation in March jumped to an unexpected 4.3 percent on an annual basis, well above the upper limit of the central bank's target of 2.5 percent +/- 1 percentage point.
Earlier on Friday, the central bank said inflation expectations eased to 4.0 percent in April from 4.6 percent in March.
The MPC raised interest rates earlier in April by quarter of a percentage point, the second such move since the start of the current tightening cycle in January.
Comments
Comments are closed for this article.