(Bloomberg) -- The Polish central bank stepped in to prop up the zloty after worries over an escalation of Russian military aggression against Ukraine sent the currency to its weakest level against the euro since 2009.
The central bank in Warsaw said on Tuesday it sold foreign currencies on the market for the zloty, without revealing the size of its operations. That's its first officially announced attempt to support the currency since 2013.
Hungary's central bank will use all tools to ensure financial stability and policy makers will continue their monetary-tightening cycle in a “predictable” and “flexible” manner, Deputy Governor Barnabas Virag said in an Inforadio interview late Tuesday after the forint plunged to a record against the euro. Rate hikes are the “most important tool” and the “first line of defense” to shield the currency, he said.
Earlier in the day, the zloty tumbled as much as 2.3% and broke past 4.80 per euro. The forint dropped close to 380 per euro before paring declines after the central bank's verbal intervention earlier in the day. Other currencies in the European Union's east also weakened. The zloty was trading 1% weaker at 4.75 per euro at 6:57 p.m while the forint was down 1.6% to 377.37 per euro.
Poland's central bank said it “has an adequate level of foreign exchange reserves and has at its disposal an appropriate set of instruments to counteract negative trends in the financial and currency markets.” Poland had $161 billion in official reserve assets at the end of January, according to the latest central bank data.
A small share of goods that Poland sells to Russia and Ukraine as part of its trade “is a factor that will limit the negative impact of this situation on the Polish economy,” according to the statement.
Before the war in Ukraine erupted, the authority had ramped up its rhetoric that it's seeking a stronger zloty to curb runaway inflation and has long argued that currency interventions are part of its available toolkit.
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