Expensive crude oil hit the zloty. The dollar is gaining strongly and the euro exchange rate is rising

The return of oil prices to three-digit levels had a negative impact on the condition of the Polish zloty. The strengthening dollar also works to the detriment of our currency, which usually weakens assets from emerging markets.

However, the war in the Persian Gulf does not seem to be ending soon, which is postponing the unblocking of the Strait of Hormuz. The market, discounting this unfavorable scenario, raised the price of Brent crude oil to above USD 100 per barrel again. The world is currently short of approximately 15% of supplies of this strategic raw material, which may result in an energy shock, increased inflation and weakened economic growth.

All this also has a negative impact on the Polish zloty. First, because Poland is an importer of crude oil and natural gas, the increase in prices of these raw materials worsens our balance of payments. And two, we are a relatively small emerging market sensitive to the outflow of foreign capital.

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On Friday morning this was visible on the domestic currency market. At 9:40 the euro exchange rate was PLN 4.2801 and was 0.6 groszy higher than on Thursday evening. The day before, the euro rose by two cents, which was accompanied by further strengthening of the US dollar.

However, the EUR/PLN exchange rate is still in the range of PLN 4.2250-4.3070. This “crisis” corridor has been in force since the beginning of March. And until the euro-zloty breaks the resistance in the zone of PLN 4.30-4.31, the situation for the zloty does not look too bad. Only a breakout would give significant reasons to worry about our currency.

– On Friday, we see no significant reasons to ease the market pressure resulting from the ongoing military operations in the Middle East. Therefore, we expect that the market situation will not change significantly, and thus global risk aversion will persist, which will support the dollar and weigh on EM currency rates, PKO BP economists wrote in their morning report.

What is particularly disturbing is the significant strengthening of the dollar in relation to the euro. The EUR/USD rate fell to USD 1.1440 and marked the lowest level since August last year. Let us recall that two weeks ago the euro cost over USD 1.18. The movement is therefore significant and on the Polish market it is reflected in the increase in the US dollar to PLN 3.7346. This is almost 2.5 cents more than on Thursday, when the dollar rose by almost 3 cents. In this way, the USD/PLN exchange rate approached local peaks.

The Swiss franc is still almost record strong in relation to the euro. The EUR/CHF exchange rate is around 90 centimes for one euro. This means that the Helvetian currency now costs PLN 4.7357 and is 1.5 cents more expensive than at the close of Thursday's quotations. However, there is still a safety buffer between the current CHF/PLN exchange rate and Monday's peak of over PLN 4.79.

K.K

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