BUDAPEST/WARSAW: The zloty surged against the euro on Monday as exporters bought the Polish currency to meet year-end commitments, dealers said, helping it up from two-and-1/2-year lows hit last week in thin holiday trade.
It gained 1.5 percent to 4.314 by 0856 GMT, leading a rebound of Central European currencies.
The zloty shed about 2.5 percent last week after an annual fall in Polish retail sales in November fuelled expectations that the country's central bank will resume interest rate cuts.
Its losses deepened due to disappointment that the finance ministry did not sell euros from Poland's funding from the European Union in the market.
In a Dec. 24 interview Polish Finance Minister Mateusz Szczurek said a "reasonable" weakening of the zloty could help Poland fight deflation and a slowdown in exports.
He also said that Poland converted part of its EU funding at the central bank this year rather than in the market to build up foreign exchange reserves to make up for the lower flexible credit line (FCL) it has requested from the IMF.
"The move (zloty plunge) during Christmas holidays has taken place in very low turnover," said one Warsaw-based dealer.
"Exporters are coming back to the market now, so the exchange rate is returning to its current equilibrium rate of about 4.31-4.33," the dealer said.
Most analysts in a Reuters poll this month projected a firming of the zloty for next year as the Polish economy is expected to grow faster than the euro zone.
Polish government bond yields were flat or slightly higher from their pre-Christmas levels.
Hungary's forint also rebounded, firming 0.6 percent against the euro to 315.14.
The region's main equities indexes, which fell to multi-month lows this month due to losses in Russia's markets, mostly firmed slightly, led by a 0.9 percent rise in Bucharest.
"Fund managers could try to pull up stock markets and close a good year," the brokerage Erste Investments said in a note.
Romania's leu which has often traded against the trend in the region's other currencies in the past few weeks, eased 0.2 percent against the euro to 4.469.
"We expect a typical holiday season trading session, which should make today's final presidential vote in Greece the session's highlight," ING's Romanian unit said in a note.
Investors are concerned that Greece's Syriza party and Eurosceptic movements could strengthen across the euro zone's peripheries if Greek lawmakers fail to elect a president.
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