BUDAPEST/PRAGUE: Poland's zloty fell to a fresh two-month-low against the euro on Monday after two hawkish policymakers signalled their support for near-term interest rate cuts to aid the economy.
Central banks are in sharper focus in emerging European markets, with the forint under pressure over impending changes at Hungary's central bank and investors watching for clues on whether the Czech bank might intervene against the crown.
The zloty lost up to half a percent after Polish rate setter Adam Glapinski, a strong advocate of tight monetary policy on a central bank that has cut rates at its last three meetings, said he would likely vote to cut borrowing costs again in February following weak industrial output figures.
Fellow central banker Jerzy Hausner - who blocked a motion to ease policy in October - told state news agency PAP the Monetary Policy Council might well cut rates at the Feb. 5-6 meeting, depending on economic data.
At 1506 GMT, the zloty was down 0.4 percent to 4.168 to the euro. Bond yields were a touch lower.
"The zloty is weakening because investors bet on further rate cuts, given dismal data from the economy. The market is returning to its old game," said Slawomir Bychowski, a currency dealer at ING Bank Slaski.
"So far 4.18 seems to have stopped further losses, but more and more often people point towards 4.25 as the next target for euro/zloty."
Romania's leu also retreated for a third day from a one-year high of 4.3195 per euro hit last week, dipping 0.1 percent to 4.349. The Czech crown and the Hungarian forint were steady at 25.61 and 292.99, respectively.
C.BANK WATCH
Emerging European central banks are mostly easing policy to help kick-start economies that are in or near recession, which is weighing on currencies.
The forint firmed after the latest in a string of verbal interventions by government members to help the unit after it plumbed seven-month lows earlier this month on concerns over a leadership change at the central bank.
A weaker forint would be dangerous due to the country's high levels of foreign currency debt, Mihaly Varga, the minister in charge of contacts with the IMF said late on Sunday.
Many investors fear the leadership change could usher in unconventional policies at the bank to help the struggling economy, and expect interest rate cuts to keep falling after five cuts last year.
The Hungarian bank's next meeting to decide interest rates is on Jan. 29.
Analysts say the Czech central bank looks increasingly likely to make good on its threat to intervene in the currency market for the first time in a decade.
A string of weaker than expected data this month has added to that view.
"We don't see the risk of intervention as acute," Komercni Banka analysts said on Monday. "This risk would rise if deflation pressures increased and the exchange would not reflect that. With the crown around 25.500, central bankers can be satisfied at the moment, in our opinion."
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