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Why is US $ getting so high or Polish zloty falling?


OWELL
8 Sep 2011 #1
I am wondering why is zloty falling down and $ getting high?is it polish economy as for usa the economy aint good currently with no jobs and no real estate market?
Varsovian 92 | 634
8 Sep 2011 #2
Doesn't work that way.
The currency markets have gone mad as the major currencies are all racing to devalue. This affects the zloty, which is dependent to a great extent on the currency dealers' attitude to risk. For perspective, the Swiss economy isn't booming, but their currency is.
OP OWELL
8 Sep 2011 #3
lol,I am a small time trader in $ and pln market do you think $ will go up?
poland_
8 Sep 2011 #4
Read this link you may get the idea, it looks like we are in for currency wars.

economist/blogs/democracyinamerica/2011/09/monetary-policy-and-exchange-rates
modafinil - | 418
9 Sep 2011 #5
I am wondering why is zlotay falling down and $ getting high?is it polish economy as for usa the economy aint good currently with no jobs and no real estate market?

lol,I am a small time trader in $ and pln market do you think $ will go up?

If you're asking such question here, I think you're going down. Not even mentioning your timeframe indicates your cluelessness. Any half decent retail trader knows the Zloty leans on the euro and the euro's sinking the past two weeks,so....

The tail doesn't wag the dog. Polands economy while healthy is insignificant to the US.
Play the lottery or go bet on sports. Traders never suffer fools.
LwowskaKrakow 28 | 431
9 Sep 2011 #6
Zloty leans on the euro and the euro's sinking the past two weeks,so....

Right. I would be interested to know the amount invested in Poland
1) By the Euro Zone
2) By The UK
3) by The USA

I read somewhere that France was the biggest investor in Poland( Carrefour, Leroy merlin, Auchan, Castorama,) but i am not sure
OP OWELL
9 Sep 2011 #7
LOL! no wonder I started playing BINGO now:)
modafinil - | 418
9 Sep 2011 #8
I read somewhere that France was the biggest investor in Poland

I reasonably certain Germany is well out in front(esp. car manufacturers such as vw) with GB in second place with more coming in with shale gas exploration). US I vaguely recall as being the fastest growing investor(IT). On stocks it's very difficult to calculate as investors move money from one country to another, their not true investors in that it's indirect interest in profit not jobs, infrastructure, etc. Zloty in the global picture is thought of as an exotic currency. I have noticed in recent times manufacturing and other key indicators make BloombergUS news which tells one something just by now being newsworthy.With the interst rates of Poland's banks the way they are they're likly making very high returns for themselves reinvesting into the Polish stock market and buying cheap, due to exchange rates, into foreign stock markets. No evidence to offer but generally the strong currency such as chf will buy into the stocks of a weak currency. Due to the 'exotic' nature of Zloty the info is not readily available to me. You'll find it faster in the Polish language. The polish wikipedia site may be more helpful and wbj.com has good detail coverage, I'm sure I've seen investment by Nation tables there somewhere.
Wroclaw Boy
9 Sep 2011 #9
PLN's 4.99 against the GBP today, it was 4.45 a few weeks ago, this swing is massive. Ive never seen it move so quickly in one direction.
dtaylor5632 18 | 2,007
9 Sep 2011 #10
It is great news for me:) Hope it goes higher but doubt it.
Sidliste_Chodov 1 | 441
9 Sep 2011 #11
PLN's 4.99 against the GBP today, it was 4.45 a few weeks ago, this swing is massive. Ive never seen it move so quickly in one direction.

It was 4,78 PLN only a few days ago! :0

It might actually be worth visiting Poland again soon, if this carries on. :)
rt3d 10 | 46
10 Sep 2011 #12
we are waiting for you, don't forget to bring some pounds to spend...
wielki pan 2 | 250
10 Sep 2011 #13
Zloty in the global picture is thought of as an exotic currency.

well hullo have I missed something. hum.. I don't think so, the history of the polish zlote is not a interesting one, not so long ago they were issuing I million zlote notes and they were worthless, The polish zlote has fluctuated during the year, lets remember that this time last year it was worth about the same 2.90zlote.. I wonder what my good friends Mr Delphiandomine, Avalon and Seamus think on this topic?
Chicago Pollock 7 | 504
11 Sep 2011 #14
The dollar is strengthening due to the economic fiasco in Europe. The Euro doesn't work for so many different countries and cultures. Looks like Greece, Portugal and Ireland might bugger off and do their own thing (as they should).
gumishu 11 | 5,017
11 Sep 2011 #15
the euro is a good idea and would work just fine provided the euro-land countries don't spend like mad and live a huge budget deficit - I think Poland should join eventually when the situation clears and currency rates stabilize so we can decide at what price should we exchange euro to złoty
lwoskakrakow
11 Sep 2011 #16
The zloty is falling and falling ( quote Financial times 08/09/2011) due to a mega sell off prompted by:

1 Fears about the Euro zone where Poland exports 55% of its products
2 Fears about the 54% of Polish homebuyers who got their mortgages in Swiss Francs


The Polish goverment intervened to stop the further decline of the zloty but in my opinion it will go further down just like the Euro zone.

A man's meat is another man's poison
delphiandomine 83 | 17,734
11 Sep 2011 #17
the euro is a good idea and would work just fine provided the euro-land countries don't spend like mad and live a huge budget deficit - I think Poland should join eventually when the situation clears and currency rates stabilize so we can decide at what price should we exchange euro to złoty

I think this is the problem - for the Euro to work, the countries need to be integrated further. It's not enough at the minute - but I'm not sure that most countries would be happy to open their books and agree to oversight from other countries.

As for Poland - my feeling is that deciding the exchange rate will be a huge problem. Historically, since the introduction of the new Zloty - it's stayed at around 2:1 with the DM, 4:1 with the Euro - but that seems a bit low. It's one reason why I think Poland will stay out - that, and I'm not so sure that the Euro is able to 'swallow' such a huge country easily.

I wonder what my good friends Mr Delphiandomine, Avalon and Seamus think on this topic?

Not much to say - the Zloty suffers from being a small currency that people will abandon for sometimes trivial reasons. There's absolutely no justification behind the recent fall - which is why it will probably bounce back. 3:1 against the Euro was far, far too strong though - and was bad news for Polish exporters. Ideally, a rate around 3:5-6 would be perfect.
LwowskaKrakow 28 | 431
11 Sep 2011 #18
the Zloty suffers from being a small currency that people will abandon for sometimes trivial reasons.

Well Poland has to abandon the Zloty for the Euro but in my opinion they should have stuck to the Zloty like England with its Sterling Pound or Switzerland with it Swiss Franc and China with its Yuan.

However Poland needed European funds and subsidies badly like Ireland so gave up on its monetary freedom and ability to devaluate its currency when things are bad and reinforce when growth is big.

It will take some time though before we see the Zloty turned into the Euro.
tyrelpl - | 10
13 Sep 2011 #19
Hang on a sec LWOSKAKRAKOW....

Where did you get you're numbers? For example:
"54% of Polish homebuyers who got their mortgages in Swiss Francs". Could you provide a source or link to that data? I have a feeling that's not accurate. If so, we'd already be in a meltdown as the WIBOR adjusts those borrowers' payments UP. My understanding is that loan payments taken out in Franks are re-calculated on a 6-month WIBOR (warsaw inter bank offer rate) rate between banks and then a 2 or 3-month rate for individuals. This means individuals do see increases, but it's not like one day it's 500 zloty the next month it is 1000. Obviously many people would default.
LwowskaKrakow 28 | 431
13 Sep 2011 #20
"54% of Polish homebuyers who got their mortgages in Swiss Francs". Could you provide a source or link to that data? I have a feeling that's not accurate.

The data is from the Financial Times. Journalist : Jan Cienski

Here is the thread:
ft.com/beyond-brics/2011/09/09/polands-zloty-falling-and-falling/#axzz1XqMz7IS4
peterweg 36 | 2,316
13 Sep 2011 #21
Well, that figure is "About 53 per cent of outstanding Polish mortgages are in francs"

which is not the same as

"54% of Polish homebuyers who got their mortgages in Swiss Francs".

The original article was on Bloomsberg and its 53/54% of value not number of individual mortgages. The actual Zloty total of CHF is actually quite small compared to Polands economy. There are 700k CHF mortages in Poland, a small portion of the households

I posted the figures in another thread here on PF, but cannot be arsed to search for it.....
LwowskaKrakow 28 | 431
13 Sep 2011 #22
The exact sentence published in the Financial Times on the 9th of Sept 2011 is (quote)54 per cent of Polish Mortgages are denominated in Swiss Francs

I personally think it scary but if you think that everything is ok...

Let's hope you are right.
peterweg 36 | 2,316
13 Sep 2011 #23
Its not good. However, the rate will not be getting any worse with the swiss fixing against the Euro.The Polish have put a figure on the growth rate cut the high CHF has on the Polish economy and its manageable.

The fal of the Zloty is brilliant for me, 20% pay rise from the bottom in May.
tyrelpl - | 10
13 Sep 2011 #24
Sorry, you typed "HAS TO" abandon the zloty??? You mean like the UK abandoned the GBP Pound Sterling, right? I've never seen so many economic blunders in one post......

Then there's your point comparing GBP, PLN, EUR, and RMB all in the same sentence. What are you trying to say? No country is ever FORCED to devalue it's currency. It's something politicians and central bankers decide to do because they think they can get away with it. History shows that for a little while, they usually DO get away with it until the truth gets to the people and/or the market collapses or makes a HUGE correction. To really compare fiat currencies is mostly folly. There's no standard at which to reference. One might say the "USD" is the standard, but that one fluctuates as well.....

If anyone is interested in this, I'd encourage you to read up on FIAT currency. Rome was destroyed over fiat when they started putting less and less silver into their currency the Denarius. en.wikipedia.org/wiki/Denarius

The truth is, that unless a currency is backed by a commodity (traditionally gold or silver, etc.), it has no other value that what the users perceive. To illustrate my point, let's say we find a chest at the bottom of the ocean.... Half of the chest was old Polish zloty and the other gold. Which one has value? Exactly, the gold. Feel free to fill in the blank with virtually any paper currency in history. You now understand. The Austrian Free-Market economists like Mises, Rothbard, and Hayek teach and warn about this. Read those guys and you will REALLY get an understanding on what money is. For starters, I'd recommend reading things like this from the Mises Institute: mises.org/daily/5577/The-Lure-of-a-Stable-Price-Level

Ok, so returning to the main subject about Euro adoption in Poland..... Poland "should" adopt it according to the Lisbon and Maastricht treaties, but it's not set in stone, so not an "enforceable" law per se. So, sorry, try again..... en.wikipedia.org/wiki/Maastricht_treaty (see point 2 near the top). and this: en.wikipedia.org/wiki/Treaty_of_Lisbon

So if we want to get technical, those treaties set up something called the ERM2 mechanism which is essentially a "waiting room" for a country that wants to get the Euro. How does it work? Basically, the exchange rates and deficit, debt-to-GDP, inflation, and exchange rate must be fixed or semi-fixed within a 2-year period after ECB approval. Then, and ONLY then can Poland adopt the Euro. *IF* during that 2-year period any of those numbers go outside the strict bounds set by the ECB, the whole deal is canceled. Since the ERM standards are so strict for money-printing central banks nowadays, most Polish economists largely laugh about the government's Euro adoption dates being realistic (although many support the idea of a common currency itself). Oddly enough, most economists KNOW THIS and refuse to speak out about it. They've been taught Keynesian economics which teaches absurd things like running up deficits and increase taxes during bad times. Mostly, the opposite is true.

Specifically in this case, Poland's problem is that the central bank, NBP is printing too much money or monetizing debt as well as doing lots of currency swaps to finance government spending and entitlements (public healthcare, beczikowe, retirement, etc...). How do we know, you ask?? Watch the supply of cash. Money supply is measured by a statistic called M3. Download the spreadsheet yourself from the NBP site and see the increases over the years: nbp.pl/homen.aspx?f=/en/statystyka/m3/m3.html and also here you can see past example reports: The last M3 statistic I read shows a 9% increase year to year. WOW! If the cost of anything in your home (or the value went down) by 9% you would be talking about it. Yet, not a word from Polish economists that are told to kowtow to the financial institutions. literally....

So, sadly, Poland's situation is not all that rosy as MANY would expect or assume. They're by-and-large copying from the USA's playbook in many (but not all) ways.
bullfrog 6 | 603
13 Sep 2011 #25
If so, we'd already be in a meltdown as the WIBOR adjusts those borrowers' payments UP. My understanding is that loan payments taken out in Franks are re-calculated on a 6-month WIBOR (warsaw inter bank offer rate) rate between banks and then a 2 or 3-month rate for individuals. This means individuals do see increases, but it's not like one day it's 500 zloty the next month it is 1000. Obviously many people would default.

The figure of 54% quoted by LK is correct, but the statement above is wrong. CHF mortgages are not indexed on the WIBOR but on the CHF LIBOR, which went plunged 2 years ago following the 2008 crisis and had remained since in the region of 0-0,25%, to which you need to add the margin taken by the Bank. So in the period 2008-late 2010, the rise of CHF/PLN was offset by a decrease in interest rate paid by the client (if you count a 150 bp margin for the bank, that would be from ca 4% to ca 2%). The recent bout of CHF appreciation has caused much more difficulties because CHF rates cannot fall lower (not much room left!) and therefore the impact of the rise is fully felt.
tyrelpl - | 10
13 Sep 2011 #26
Thanks for the link. Interesting. So maybe I was wrong, however, I think it could be as peterweg suggested as being mis-stated. I know Jan Cienski. I'll call him and ask. I'll post the response. Thanks again for the posts and interesting discussion. :-)

The other issue from the FT article (linked above) is about the "$30bn credit line with the International Monetary Fund" which scares me a heck of a lot more than a few houses backed by CHF. I can't imagine ANYONE taking credit when they don't need it. DOUBLY so for a government. If Poland isn't in trouble and doesn't expect to be in trouble, that's a heck of a line of credit to pay for. Yes, I said PAY, because it's not free. The Government(s) which controls the IMF has to make money somehow.....

Back in 2010 they announced the "don't need it: dalje.com/en-economy/poland-no-longer-needs-imf-credit-line/299894

and here's the numbers on how much it s costing Poland: 40 million DOLLARS a YEAR to maintain! I don't see how that's a good deal for Poland at all.......
bullfrog 6 | 603
13 Sep 2011 #27
this is a back up line, not designed to be drawn, the objective of which is to demonstrate to the markets that the debtor (in this case the Polish Govt) has ample creditworthimess and liquidity. It' s a common feature in the international markets, used by many of the world's best rated companies.
delphiandomine 83 | 17,734
13 Sep 2011 #28
The other issue from the FT article (linked above) is about the "$30bn credit line with the International Monetary Fund" which scares me a heck of a lot more than a few houses backed by CHF.

It's a non-issue - it's there if Poland needs it, which it will if there's another crisis. Poland survived (just) the last one - but if it happens again, then IMF money will certainly be needed.

and here's the numbers on how much it s costing Poland: 40 million DOLLARS a YEAR to maintain! I don't see how that's a good deal for Poland at all.......

It's not a bad idea to have it available just in case - certainly, makes more sense than needing it and not having it available.

Call it an insurance policy.
tyrelpl - | 10
13 Sep 2011 #29
Bullfrog, You mean creditworthiness...... like for example of the USA who just got a lowered rating or did you mean countries like Ireland or the other PIIGS countries that just tanked or are in the process of tanking? I'd like to know what individual or company goes out and gets a loan just to PROVE he/she/it can? That's absurd...... just "because everyone else does it" is NOT a good excuse. I thought adults gave that line up after adolescence.... ;-)

Seriously, 40 MILLION DOLLARS a year is a hell of a lot for a country that supposedly has a self-described "budget hole". Sure, they'll cut public sector wages and jobs, and save few hundred thousand from the budget, but the HUGE elephant in the room - a 40 MILLION dollar service fee remains? That's REALLY bad policy. In fact that's nothing more than an expensive P.R. stunt! If we're gonna be honest and call it insurance, it begs the question. INSURANCE from WHAT? It's not like they walk in the store and ask the shop keeper "How Much?" and he replies "$40 million". "Ok, I'll take two of those."

So back to my original question - WHY?? If they really don't need it and if they're really not in trouble, and they don't anticipate problems? WHY and WHAT for?
delphiandomine 83 | 17,734
13 Sep 2011 #30
I'd like to know what individual or company goes out and gets a loan just to PROVE he/she/it can?

Uh, it's quite normal for companies to have an overdraft facility available even if they don't use it. Why are countries any different?

That's absurd...... just "because everyone else does it" is NOT a good excuse.

Not a good excuse? Perhaps making sure that there's always cash available to pay the bills isn't such a bad thing where Governments are involved?

Seriously, 40 MILLION DOLLARS a year is a hell of a lot for a country that supposedly has a self-described "budget hole".

40 million dollars is nothing in the grand scheme of things. I mean, right now, in Wroclaw, they're about to build a new attraction in the zoo that's going to cost around 130 million dollars. For one attraction. What's 40 million dollars? Peanuts.

In fact that's nothing more than an expensive P.R. stunt! If we're gonna be honest and call it insurance, it begs the question. INSURANCE from WHAT?

Uh, insurance against another crisis? It's not difficult to work out, surely...

So back to my original question - WHY?? If they really don't need it and if they're really not in trouble, and they don't anticipate problems? WHY and WHAT for?

They don't need it and they're not in trouble, but who can predict the future? If another Leeson took out PKO, Poland would be in financial trouble.


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