BUDAPEST/WARSAW: The zloty and Central European equities reversed a fall on Tuesday as a rebound of crude prices curbed risk aversion in global markets.
The zloty, trading at 4.463 against the euro at 1505 GMT, was 0.1 percent firmer from Monday after an earlier fall to 4.501, near the 4-year lows hit last week.
It also rebounded from a 2-and-1/2-year low against the forint which traded 0.1 percent weaker against the euro after the Hungarian central bank kept interest rates on hold, as expected, but flagged possible further monetary loosening.
"Currencies heavily dependent on commodities prices have also recovered and (the forint and the zloty) have a correlation with them," one Budapest-based currency dealer said.
"Looking forward, crude prices and the Chinese economy will remain critical... and ECB meetings will also be exciting."
Warsaw assets got a hit early this year from concerns that Poland's new government is centralising power and its policies will increase burdens for banks.
S&P downgraded Poland earlier this month and the concerns deepened after Moody's said on Tuesday that Poland's larger-than-expected deficits and changes to its spending rules were credit-negative.
"They (Moody's) point out there is a high risk regarding the 2017 budget and the market is pricing this in the whole move in the morning was caused by foreign banks selling the zloty," a Warsaw-based dealer said.
Healthy economic growth pospects in the region and in Poland, however, give support to Warsaw assets.
Poland said on Tuesday that its economic output grew by 3.6 percent last year, slightly more than analysts' forecast of 3.5 percent, while the country's unemployment rate was 9.8 percent in November, compared with analysts' 9.7 percent forecast.
Polish forward rate agreements price in 80 percent chance for a 25 basis point cut in the central bank's 1.5 percent main interest rate in 6-9 months, and 50 percent chance for such a move in 3-6 months..
The EU said in its fiscal sustainability report late on Monday that 11 of its members, including Romania, Slovenia and Croatia, face high risks.
Romania's leu eased 0.1 percent to 4.534 against the euro.
Bucharest's main equities index which led a regional decline in early trade, narrowed its loss to 0.3 percent from almost 2 percent.
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