The worst month for the Polish zloty since 2016 is coming to an end. The depreciation of the Polish currency has not been so strong for years

Although there is still one trading day left until the end of the month, it is worth noting that this is the worst month for the Polish currency in years. In September 2023, the US dollar gained 6,75% against the Polish zloty, which means the largest loss of PLN value since November 2016. Then the dollar strengthened by 7,17%, so theoretically this record may still be broken tomorrow. If so, it would mean that we have the worst month for the Polish currency since 2012, i.e. for 11 years.

The situation looks better for the depreciation of the Polish zloty against the euro, where the EUR/PLN exchange rate increases by 2023% in September 3,6. This means that this month the zloty lost the most since March 2020. Then the euro gained over 5% against the zloty.

To what do we owe such a sale of the zloty?

First of all, in September a surprising decision was made by the Monetary Policy Council, which decided to cut rates by as much as 75 basis points. from 6,75% to 6,00%. This shocked the currency market, where over two days, September 6 and 7, the zloty lost the most in its history. Additionally, on the global currency market, the euro depreciated against the dollar for the 11th week in a row due to poor macroeconomic data, led by the recession in Germany, which is taking the form of stagflation. The increase in interest rates also did not help EBC, which has probably already ended the cycle of raising interest rates. However, it will continue to tighten monetary policy in other ways, by reducing the central bank's balance sheet and by reducing the money supply. Such things don't happen in Poland.

Is it bad that the zloty lost its value so quickly?

The scale of the movement is certainly surprising and it is better for the course adjustment to take longer than to be abrupt, however RPP she had to take this into account. Nevertheless, in general, it is better for the Polish economy for the zloty to be weaker than stronger. This is due to the fact that in Poland inflation and, consequently, wages grew much faster than in the euro zone or Germany. Additionally, the zloty was strengthening until June, which, together with higher labor costs in Poland, limited the competitiveness of exports.

Currently, the dynamics of export orders has slowed down significantly due to the economic problems of trading partners, which all the more requires greater competitiveness of the Polish economy. This is where a weaker nominal, but above all real, exchange rate can help. It seems that the optimal level of the euro exchange rate in this respect is in the range of PLN 4,70-4,80.