State bank props up Polish zloty on FX market say sources

BGK interventions were confirmed by a third insider but the bank would not comment on the issue. Jacek Turczyk/PAP

Poland's special-purpose development bank BGK has been actively trading on the FX market, increasing its activity in recent days to limit the weakening of the Polish currency, financial market insiders have told PAP.

"BGK has certainly been present regularly since the onset of the war," one insider told PAP, referring to Russia's war on Ukraine.

At first, the bank exchanged small amounts of euros from EU funds for the zloty and sought to prevent larger weakening moves, the source said.

"Over the past several days they are clearly present on a regular basis," the insider said. "They are clearly showing they are on guard."

"For some time they have been trying to limit the FX rate near 4.86 for the euro," the source continued. "But rather not to lower it, just to prevent it going further (up - PAP)."

Another insider also believed BGK attempted to keep the Polish currency at certain levels but without the ambition of lowering the FX rate. The amounts traded "look similar to what we receive in EU funds," a second source said.

The scale of interventions weakened this week after a stronger presence a week ago, the insider said.

BGK interventions were also confirmed by a third insider but the bank would not comment on the issue.

The zloty has weakened some 6 percent against the euro since the start of the war in Ukraine.

Poland usually exchanges currencies to the zloty through the NBP but soon after the outbreak of the war it declared a shift to exchanging on the market.

The zloty was trading near 4.85 for the euro on Wednesday afternoon.