Zloty down on rates shift, leu up on IMF

The Polish zloty weakened against the euro on Friday in Easter trade as prospects of a May interest rate hike dimmed, while an upcoming International Monetary Fund aid review bolstered Romania's leu. Other emerging European currencies were steady against the euro in trade thinned significantly by the closure on both Friday and Monday of major markets like London and Hong Kong.
By 1337 GMT, the zloty was 0.2 percent weaker versus the euro. It jumped briefly by 1 percent on Thursday when the Finance Ministry said it would convert some of the 30-32 billion euros it will receive in European Union funds through the end of 2012 in the spot market.
Economists said this could push the zloty up in the near term and potentially postpone an expected interest rate hike by a central bank fighting persistently high inflation. "The likelihood of an interest rate hike in Poland in May, given the likely positive impact of the news on the zloty, has probably fallen, in our view," Barclays bank said in a note.
The leu was 0.3 percent stronger against the euro after the IMF said it will send a team to Bucharest from April 27 to May 9 to review the country's new precautionary two-year aid deal. Romania, which has enforced painful measures to shore up public finances and keep a now completed 20-billion-euro IMF-led aid package on track, agreed to a new deal in February, reassuring investors it is still committed to fiscal reform.
Traders said money sent home ahead of Easter from Romanian migrants working abroad also helped shore up the currency. Workers' remittances, the equivalent of some 3 percent of GDP two years ago, fell sharply last year and in 2009 as weak recoveries clouded the jobs climate in western economies, but recent data showed a significant improvement so far this year.
Elsewhere in the region, the Czech crown was flat while the Hungarian forint was 0.3 percent weaker, while bond yields were roughly unchanged. Shares in the region were also mixed, with Prague's and Budapest's markets down 0.2 and 0.6 percent respectively, while Bucharest's was 0.8 percent firmer. The Warsaw stock exchange and bond market were closed.