LONDON Feb 18 The Polish zloty hit two-week
lows on Monday as investors bet that falling inflation would
pave the way for more rate cuts in coming months while a drop in
Chinese stocks pressured broader emerging equities.
Benchmark emerging equities fell 0.3 percent, with
moves restrained by the U.S. Presidents' Day holiday. Shanghai
stocks lost almost half a percent.
Poland's zloty fell to 0.24 percent, extending
losses and underperforming all other currencies in the region
after investors grew convinced a sharp fall in inflation would
lead to further monetary easing ahead.
Data on Friday showed Poland's inflation at 1.7 percent in
January, a six-year low, prompting a central banker to say
interest rates should be cut in March.
The zloty slumped almost 1 percent last week and has lost
almost 3 percent against the euro this year.
"The deeper-than-expected inflation drop in January adds to
pressure on the conservative majority at the Polish rate-setting
panel to continue policy easing, despite a nearing pause in rate
cuts suggested by them earlier this year," Nordea told clients.
The Hungarian forint however rose 0.4 percent on conflicting
reports as to whether Economy Minister György Matolcsy would
take over as the next central bank governor.
Matolcsy is widely expected to engineer a weaker forint via
deep rate cuts but the prime minister last week hinted he may
not get the job.
"I think it's partly in the price that Matolcsy will be the
next governor... If he doesn't become governor the forint will
go a bit lower... so some people may think that from a risk
reward perspective it's better to be long forint at this point,"
said Murat Toprak, emerging markets strategist at HSBC.
The Turkish lira and bond yields traded flat as investors
awaited a central bank rate decision on Tuesday.
Caution grew over possible intervention by South Korean
authorities as the won hit a 4-1/2-year high against