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Zloty with strong drops (Daily analysis 24.09.2020)

24 Sept 2020 14:47|Bartosz Grejner

The demand for the dollar is not weakening - the US currency is the strongest in two months. The zloty loses a large part of the profits earned in previous weeks. The EUR/PLN pair approaches 4.54, and the USD/PLN goes near 3.90.

The dollar goes up

Around Thursday midday a continuation of the dollar strengthening trend initiated a few days ago was observed. Already in the morning, the quotations of the main currency pair, i.e. the euro to the dollar, fell to about 1.1633, the lowest level since July 24th. Looking at the US currency in a slightly broader perspective, Bloomberg's dollar index (which includes emerging country currencies) also reached its highest value in two months.

Yesterday, the dollar's appreciation was reinforced by negative sentiment in the broader market, which increased aversion to risky asset classes. Although market sentiment was slightly better in the morning - the main European market indexes were rebounding from local lows, rising above yesterday's closing levels, the demand for risky assets was falling again as the beginning of the US session approached.

Futures on US market indexes announce an opening below yesterday's levels, which may suggest a continuation of negative sentiment. This combined with the clearly growing demand for the dollar in recent days is noticeably weakening the zloty basket.

The zloty among the weakest currencies of emerging countries

September is, for the time being, the worst month for the zloty since March in terms of the speed of its weakening. The EUR/PLN exchange rate, rising to about 4,537, has reached its highest level since mid-May. The USD/PLN exchange rate approached 3.90, and the CHF/PLN again exceeded 4.20 (4.21 in the afternoon).

The zloty was one of the strongest-growing currencies among the emerging countries during a period of rapid depreciation of the dollar a few weeks ago. Today, however, the zloty is one of the currencies that most rapidly lose the profits made during that period.

The main concerns of the market over the last days, which contribute to the dollar's appreciation, are the increasing rate of coronavirus cases in Europe and the related much faster than expected drop in activity in the services sector (the last PMI), as well as the lack of a fiscal package in the USA, the necessity of which has also been indicated by the members of the Federal Reserve (and this significantly weakens the risk appetite).

In such conditions, it will be rather difficult for the zloty to record more significant increases in value, except on days of recovery in the broader market. Especially as the US elections are approaching, which will also increase uncertainty among market participants, and this may also prevent the zloty from returning to levels one month ago in the next few weeks.

24 Sept 2020 14:47|Bartosz Grejner

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

See also:

23 Sept 2020 17:42

Dollar appreciates in the afternoon (Afternoon analysis 23.09.2020)

23 Sept 2020 14:11

Dreadful data from the service sector (Daily analysis 23.09.2020)

22 Sept 2020 17:22

Stronger dollar returns (Afternoon analysis 22.09.2020)

22 Sept 2020 13:50

Slight rebound on the market but zloty with limited increases (Daily analysis 22.09.2020)

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