Zloty firms on state bank sales

BUDAPEST: A Polish state bank lifted the zloty on Thursday by selling dollars into the market.

Romania's central bank kept interest rates at a region-wide high of 6.25 percent as expected, but said slowing inflation may give space to ease borrowing costs to aid the sluggish economy.

The Romanian leu inched down on the day, by 0.2 percent by 1434 GMT, while the Czech crown was steady. Central European stocks held onto morning gains in afternoon trade.

But dealers said markets failed to get traction on relief from German parliamentary approval of new powers for the euro zone's rescue fund on Thursday.

Investors have mostly sold central European currencies and stocks since the start of the summer due to the region's close links with the euro zone. Market pressure continues to build on policymakers to ringfence the bloc's debt crisis.

Last week, Polish authorities launched an unprecedented coordinated intervention on the foreign exchange and debt markets, which central bank head Marek Belka said had taught speculators a lesson.

On Thursday, Poland's state-owned BGK bank followed up, selling an unspecified amount of dollars on the spot market.

"We believe that intervention will prevent the market from looking at the zloty as a CEE scapegoat for core Europe's challenges," said Roderick Ngotho, EMEA FX strategist at RBS.

"The central bank will retain market presence to deter speculative strategies that sell the zloty as a proxy for the current EU challenges."

Copyright Reuters, 2011