2025-05-23 12:24
publication
2025-05-23 12:24
The latest BIS data (Bank of International Settlements) show that in April the so -called A real, effective PLN (reer) course has shot down from the highest level since 2008. The April Gold Correction was not particularly large (just -0.6 percent when it comes to Reer), but it was enough for the real course to be the lowest in four months.
The chart below resembles a long -term context of the current situation, which we have already written about. In fundamental terms, the Polish currency is very expensive (the April correction has not changed much here). As expensive as before only for a few months during 2008. It is enough to mention that the Reer exchange rate is still 20 percent. Above the long -term average.
A real, effective exchange rate (reer) shows the strength of the currency in a fundamental approach, taking into account the differences in inflation between countries and the structure of foreign trade – this approach is preferred by the theory of economics.
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Is it possible to find any relationship between this meter of currency force and Polish assets, e.g. the stock market? Let's look at the chart below.
It is striking that the impressive bull market wave on the WSE, which has been going on since autumn 2022, was accompanied by a spectacular increase in a real exchange rate. It is true that this real appreciation of our currency was partly due to the inflation effect (especially since the pandemic explosion, inflation in Poland was persistently higher than e.g. in the euro area), but it was probably also the result of the influx of capital. And hence the simple way to explain the bull market on the WSE.
However, the high level of a real effective rate of PLN may be disturbing because historically from such high ceilings this course was able to break down (2008, 2001-03), which was accompanied by strong turbulence on the National Stock Exchange (another matter that after such a breakdown, cheap golden turned out to be fuel for the next bull market thanks to, among others, a positive impact on exports).
In other words, the case undoubtedly requires urgent observation. The spectacular real appreciation of the zloty from autumn 2022 has its positive side (accompanied by a strong bull market on the WSE), but the levels to which the rate of PLN wandered seems quite risky in the long run.
Author: Tomasz Hońdo, CFA, Quercus TFI SA
