WARSAW: The Polish zloty hovered near a 10-month low on Friday after weak retail sales data bolstered expectations the central bank will cut interest rates again next month to shore up central Europe's biggest economy.
Other currencies in the region were mixed. The Czech crown picked up after its nearly 4 percent slide this year but dealers said it was likely to remain weak in the longer term given a sluggish Czech economy and central bank intervention risk.
The zloty fell 0.2 percent to 4.204 to the euro by 0859 GMT, just off a four-month low of 4.2120 hit on Thursday. The crown gained 0.6 percent, while the Hungarian forint added 0.2 percent.
The zloty, the region's most liquid currency, has lost 3.1 percent this year, hit by domestic rate cuts and worries that an eventual unwinding of US monetary stimulus could curb fund inflows to emerging markets.
It is now nearing a nine-month low at 4.2141. Data showing Polish retail sales fell last month cemented market expectations that the central bank will cut interest rates next month from their current all-time low of 3.00 percent.
"The data clearly points to interest rate cuts. This is not supportive for the zloty," said a Warsaw-based currency dealer.
Forward rate agreements have priced in a further 30 basis point fall in the three-month interbank lending rate WIBOR over the next three months.
Usually the interbank rate remains above the central bank's seven-day benchmark interest rate, but it is currently already 24 basis points below it, signalling the market is pricing in up to 75 basis points in rate cuts in total in June and July.
The pressure from lower rates was to some extent offset by a better-than-expected reading of a German business sentiment index IFO, dealers said.
Germany is Poland's largest trade partner. The region's stock markets mostly strengthened. Budapest led gains with a 1.3 percent rise.
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