Poland's State-Owned BGK Said to Sell Euro for Third Day, Supporting Zloty

Bank Gospodarstwa Krajowego, a Polish state-owned lender, sold euros for a third day as the government sought to bolster the zloty to keep public debt below the level that would trigger austerity measures, traders said.

The lender known as BGK started selling the euros before 11 a.m. in Warsaw, helping weaken the common currency to as low as 3.9482 zloty, said four Warsaw-based traders, who declined to be identified because the information isn’t public. The zloty traded little changed at 3.9703 per euro as of 2:13 p.m. in Warsaw. The currency has gained 3.3 percent this year, heading for its biggest rally since 2007.

BGK, which sometimes exchanges foreign currencies for the Finance Ministry, sold euros this week, helping the zloty rise to the strongest level in more than a month, traders said. Analysts at banks including BNP Paribas SA and ING Bank Slaski SA have said Poland may try to shore up the zloty before year- end, to keep foreign borrowing from pushing total debt in local- currency terms to levels that would prompt austerity measures.

“In recent days the invisible hand of the market came second to the less invisible hand of BGK,” Bank BPH SA economists led by Maja Goettig in Warsaw wrote in a note to clients.

Polish public debt was about 702 billion zloty ($236 billion) at the end of the year, less than 53.5 percent of gross domestic product, Deputy Finance Minister Dominik Radziwill said in an estimate distributed by e-mail today. If debt exceeds 55 percent of GDP, spending cuts and tax increases would be required under public finance law. Poland holds general elections next year.

BGK probably sold from 1.2 billion euros ($1.6 billion) to 1.5 billion euros on the market this week, said Radoslaw Bodys, London-based strategist at UBS AG, ranked by Euromoney Institutional Investor Plc as the world’s second-biggest foreign-exchange trader.

Reducing Debt

The ministry has used some of its foreign-currency holdings to “reduce the debt” in December, Piotr Marczak, head of the ministry’s public debt department, wrote in an e-mail yesterday. Poland is continuing to “take advantage” of a weaker zloty to exchange part of its 5.6 billion-euro holdings, he said Nov. 29.

Traders at two banks said BGK offered each lender 10 million euros. The state-run bank was also selling the common currency yesterday and the day before, according to at least two Warsaw-based traders. BGK may have sold about 150 million euros on the market on Dec. 27 and exchanged the currency at about 4.04 zloty per euro on Dec. 10, according to traders.

Piotr Stalega, a spokesman for Warsaw-based BGK, didn’t answer a call to his mobile phone and a landline seeking comment. The Finance Ministry doesn’t comment on “market transactions or the lack of them,” its press office said in an e-mailed response to questions from Bloomberg News.

The ministry uses the so-called fixing exchange rate from the last working day of the year to determine the 2010 public debt level. The central bank set the rate at 3.9603 against the euro today, according to its page on Bloomberg.