Receding political risks are seen boosting the Polish zloty, and the Czech crown will be helped by the likely removal of the central bank's cap in the next 12 months, a Reuters poll of foreign exchange strategists and analysts showed. The median forecasts in the August 26-September 1 survey of 48 contributors put the zloty up 2.2 percent from Wednesday's close to 4.2684 against the euro by the end of August next year.
The zloty hit a one-month low on Thursday at 4.369, but the poll sees it firming to 4.35 by the end of September and to 4.3 by February. Weighed down by rising expectations of the Federal Reserve lifting its benchmark interest rate this year, the zloty has also eased due to concerns over Poland's political landscape, including government moves to boost its influence on the banking sector and a row between Warsaw and the European Union.
Moody's said in a note that changes made by the government in the constitutional court last year and perceived by critics to undermine the rule of law in Poland threatened the country's relationship with the EU and investors. Most analysts in a separate Reuters poll said the agency would still not downgrade Poland in its rating review on September 9. Bartosz Sawicki, head of research at DM TMS, said political risks were almost entirely priced in. The Warsaw brokerage sees the zloty firming to 4.21 in the next 12 months.
"On the other hand, market expectations of a rate cut are exaggerated," he added. "We expect (economic output) data to rebound and policymakers to stay on hold." The crown is forecast to firm to 26.9 in the next 12 months, according to the median from in the poll. That would be a very small 0.5 percent rise, but it would boost the crown past the threshold at near 27 which the Czech central bank introduced in 2013 to prevent it strengthening and to allow weak inflation to rise and economic growth to rebound.
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