Poland's national currency weakest in years

The Polish zloty on Friday hit the lowest level against the euro in 12 years amid the central bank's dovish stance of keeping interest rates low.

"Local factors have been playing an increasing role in shaping the Polish currency's exchange rates," PAP was told by Wojciech Stepien, an economist with the BNP Paribas bank.

According to him, the first factor is the dovish stance of the central bank which keeps interest rates low to promote loans and support exporters benefiting from the week national currency.

"The second is the uncertainty surrounding the upcoming ruling by the Supreme Court on legal issues concerning foreign currency loans," he said.

Almost a million Polish consumers who held mortgages denominated in foreign currencies, especially the Swiss franc, were hit by an unexpected appreciation of the Swiss currency several years ago which, in some cases, doubled their outstanding debt.

If the Supreme Court ruling, expected on April 13, is unfavourable to the banks, they could face huge losses, putting a strain on the country's banking system.

Stepien said the National Bank of Poland's approach was increasingly diverging from that of its peers in other countries "which have been changing their policy towards a more hawkish one."

"Additionally, other central banks seem concerned about rising inflation," he added.

Poland's inflation rate is one of the highest in Europe and is now approaching 3 percent, but the National Bank of Poland has ruled out any interest rate hikes for the time being.

On Friday, the PLN/EUR exchange rate nearly touched 4.65, a level last seen in 2009. The Swiss franc was worth 4.19 zlotys, but in 2008, when Polish banks strongly promoted mortgages denominated in Swiss francs, the Swiss currency was worth as little as 2 zlotys.