5/09/2006

Poland's Zloty Continues Rise vs. Dollar

The Polish zloty continued its rise against the dollar Monday amid a general weakening of the U.S. currency, showing strength despite a new government coalition with Euro-skeptic parties.

The zloty was at 2.9929 to the dollar, up from 3.0129 on Friday. A month ago, it took 3.2543 zlotys to buy a dollar.

One analyst said it was a case of dollar weakness, not zloty strength, with the dollar falling against the euro and Asian currencies.

"This is all about the weak dollar, and has nothing to do with the zloty," said Ryszard Petru, chief economist for BPH Bank.

The zloty was also trading at 3.8230 to the euro, compared to 3.8212 on Friday, with investors largely ignoring a new coalition agreement that gives Cabinet posts to politicians who had opposed Poland's 2004 entry into the European Union.

Andrzej Lepper, a populist who leads the farm-based Self-Defense party, joined the government, becoming agriculture minister and a deputy prime minister. Roman Giertych, head of the nationalist League of Polish Families, was named education minister and also deputy prime minister. Both leaders oppose adopting the euro.

Petru said investors were not reacting because Poland's economic fundamentals -- including strong growth and low inflation -- remain good.

Though Poland trades mainly with other European countries, the strength of the currency against the dollar has had a significant effect on the local economy, mostly by cushioning the shock of the rising price of oil, which is priced in dollars.

The euro fell slightly against the dollar Monday to US$1.2727 after hitting a year high Friday at US$1.2735.

SOURCE:
Associated Press



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