WARSAW/PRAGUE: The Polish zloty hit a two-month high against the euro on Tuesday, lifted by the finance ministry's plans to sell euros on the market, while the forint continued to be boosted by Hungary's fiscal reform plans.
Other currencies in the region were stable as investors awaited a US Federal Reserve policy meeting, at which policymakers were expected to discuss when to begin exiting ultra-easy monetary policy.
"It seems that we are in for further strengthening of the zloty ... the news regarding the flow of funds is positive and nobody wants to go against the tide," a Warsaw-based FX dealer said.
Poland announced last week that it would be regularly selling some of the funds it receives from the European Union on the spot market to support monetary policy and keep a lid on inflation.
A member of Poland's 10-strong Monetary Policy Council told Reuters on Tuesday that the move should gradually strengthen the zloty and smooth its fluctuations, which in turn should reduce inflation and limit the need for rate hikes.
"The rising EUR/USD rate is also supporting the zloty. The next target is 3.92 and then potentially 3.89-3.90," the dealer said.
By 1323 GMT, the zloty added 0.3 percent against the euro, to trade at 3.936.
The market was unmoved by data showing Poland's general government deficit reached 7.9 percent of GDP in 2010, which was in line with expectations.
Market players were awaiting Polish retail sales and unemployment data due to be published on Wednesday at 0800 GMT.
FORINT GAINS
The forint, the region's top gainer so far in 2011, was expected to continue to strengthen barring any sudden increase in global risk aversion. On Tuesday the forint added 0.4 percent to 264 to the euro.
The currency has rallied as investors favoured it over regional peers, mainly the zloty, on the back of Budapest's fiscal reform plans, first unveiled in March. Last week, parliament approved a constitution with strict new rules to force the country to cut its debt.
"The forint is still fuelled by the government's reform plans, which markets have appreciated of late, but it also needs sustained global risk appetite to remain on a firming track," a Budapest dealer said.
Elsewhere, the Czech crown was steady ahead of a no-confidence vote which the centre-right governing coalition was expected to survive.
Czech President Vaclav Klaus appointed two new ministers last week in a cabinet reshuffle following a corruption scandal that nearly brought down the government.
The Romanian leu was little changed, shrugging off widely expected news that the government had scrapped a target to adopt the euro in 2015.
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