BUDAPEST/WARSAW: The zloty weakened to a three-week low against the euro on Thursday as concern resurfaced over policy risks in Poland. Other Central European currencies rose, with the crown gaining after the Czech Republic released robust economic data.
The zloty fell two-thirds of a percent to 4.2935 to the euro by 1347 GMT.
It also reached a three-week low against the forint. The forint gained 0.25 percent against the euro. Markets ignored comments by central bank Deputy Governor Marton Nagy, who said a weaker forint could help "desired inflation" return.
Czech retail sales surged 8.5 percent year-on-year in February. Industrial output grew an annual 5.6 percent.
Poland's economy is also expanding robustly, and that has helped the zloty recover since a downgrade of Poland's credit rating by Standard and Poor's in January. But concern resurfaced on Monday when Moody's, which will review Poland's credit rating next month, said the country is caught in a constitutional crisis that is negative for its rating.
Investors are also worried that a proposed bill to convert Swiss franc mortgages to zlotys would further damage financial institutions already burdened by a new bank tax. The governors of Poland's and Romania's central banks, at separate news conferences on Wednesday and Thursday, also mentioned a possible exit of the United Kingdom from the European Union as a key risk.
"Given the expected return of the CHF relief bill debacle and a possible Moody's downgrade, we anticipate a higher EUR/PLN (weaker zloty) in the coming weeks," ING said in a note.
According to a Reuters poll of analysts, the zloty and the forint may face a shaky next few months because of policy risks in Poland and monetary easing in Hungary.
The Czech crown strengthened to 27.022 against the euro, stopping near the Czech central bank's cap of 27 to the euro, which it defends with market interventions. Central bank's figures released on Thursday showed that speculative pressure on the cap was not strong early this year.
The bank bought foreign currency worth 623 million euros in February, the second-lowest monthly level since it introduced the cap in 2013.
"The CNB can easily continue with its FX regime into H1 2017, nevertheless, increasing speculative pressure is bound to appear with rising inflation rates during the coming months," Raiffeisen analysts said in a note.
Serbia's central bank held its main interest rate at 4.25 percent, as expected.
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