SNAP ANALYSIS-Polish central bank may slow, not stop zloty gains

                                
 * Analysts see zloty up mid term on strong fundamentals
                                
 * Demand for Polish debt, state assets to underpin zloty
                                
 
                                
 By Kuba Jaworowski
                                
 WARSAW, Apr 9 (Reuters) - Intervention by Poland's central
bank on the currency market will probably only slow, not stop,
the zloty's gains given that Poland's economic fundamentals are
relatively strong and investors are keen to buy into Polish
assets.
                                
 Around midday on Friday the central bank intervened for the
first time since Poland let the zloty float freely ten years
ago. The move prompted a 1 percent fall in the zloty which has
recently hovered around 16-month highs against the euro, raising
concerns that further appreciation could hurt the economy.
                                
 But analysts said Poland's status as the only economy in the
27-strong EU to avoid recession last year provided a solid base
for zloty gains in the medium term.
                                
 "Today's move of the central bank does not... change
Poland's image as an economy with strong fundamentals,"
Raiffeisen Bank Polska analysts wrote in a note to clients.
                                
 "...that's why we expect the zloty to stay strong and the
intervention only to weaken the appreciating move."
                                
 The zloty was trading around 3.876 per euro in late trade on
Friday, after falling to an almost two-week low of 3.8907
earlier in the session. <EURPLN=>
                                
 
                                
 BONDS, PRIVATISATION
                                
 Poland's economic growth is expected to accelerate to about
3 percent in 2010 from 1.7 percent a year earlier.
                                
 Analysts say foreign investors are still lining up to buy
zloty-denominated assets ranging from government debt to state
assets. To do this they need to exchange their euros and dollars
into zlotys.
                                
 "Factors supporting the zloty include demand for Polish
bonds and the privatisation plans," Raiffeisen analysts wrote.
                                
 The total value of state assets on sale this year in the
government's ambitious privatisation plan is seen at 25 billion
zlotys. Poland's borrowing needs this year total 197 billion
zlotys and the lion's share will be covered by local currency
bonds.
                                
 "We expect more noise on spot (...) but we remain confident
in the medium-term uptrend in the zloty," Koon Chow, FX
strategist at Barclays Capital wrote in a note to clients.
                                
 "We think the central bank wants to slow the pace of zloty
appreciation so as not to imperil the cautious cyclical
recovery."
                                
 (Editing by Ruth Pitchford)