(Rewrites throughout)
* Polish zloty slides to near all-time low
* Polish PM says government ready to intervene on mkt
* Finance Ministry says has 3.2 bln euros at its disposal
* Cbankers say zloty undervalued, try to talk up the zloty
By Karolina Slowikowska
WARSAW, Feb 17 (Reuters) - Poland's zloty neared an all time
low against the euro on Tuesday, prompting a government pledge
to prop it up for the first time since starting a slide that has
wiped out a third of its value and wreaked havoc in the
corporate sector.
The zloty has fallen more than 16 percent since the start of
this year against the euro in a sell-off that has engulfed other
currencies in the region due to worries over a collapse in
growth of their export-dependent economies and financing.
This week it fell more than 6 percent in just two days over
rising investor fear about exposure to heavily loss-making hedge
contracts by Polish firms that regulators have said could reach
up to 15 billion zlotys ($4.0 billion).
The zloty, also battered by other factors, came within a
hair of an all-time low of 4.9330 per euro. Prime Minister
Donald Tusk said the government would start selling euros if the
zloty <EURPLN=> fell to 5.0 versus the single currency.
"After consultations with the finance minister and with
experts I want to say that Poland's government is calm when it
comes to the currency volatility," Tusk told a news conference.
"But I don't hide that the borderline of 5 zlotys per
euro...is the moment in which we will take a decision to start
the process of selling euros (from EU funds)," Tusk added.
European Union funds, for infrastructure projects or farm
subsidies, are exchanged mainly at the central bank so as not to
affect the freely floating zloty. The Finance Ministry said it
had about 3.2 billion euros it could use to support the zloty.
Polish Monetary Policy Council member Dariusz Filar said he
supported the government's proposal to use the funds to support
the zloty but without setting a target level. He also said the
central bank may take its own intervention steps [].
Ruling party leader Zbigniew Chlebowski told Reuters last
week the government estimated it would receive about 10 billion
euros in EU funds this year and in a first signal how serious
the situation was, he said it could use the euros to help the
zloty.[]
In Brussels, a deputy finance minister said the government
would meet the Monetary Policy Council (MPC) next week to
discuss the recent zloty slump, which has hit firms. The weaker
the unit gets, the bigger potential losses for corporate buyers
of options that did not bet on such severe depreciation.
A handful of small Polish companies have been forced to seek
bankruptcy protection because of these currency bets, and others
are in talks or have already settled with banks.
MARKET REELING
In another sign how fast economic prospects were
deteriorating, Moody's rating agency said the accelerating
recession in emerging Europe would be more severe than elsewhere
[].
The Hungarian forint fell to a record low and the Czech
crown touched its lowest since October 2005 on Tuesday, with
concern rising over the region's reliance on foreign debt.
The zloty immediately gained 0.8 percent against the euro on
Tusk's comments on the possible government activity on the
currency market. At 1423 GMT, the zloty <EURPLN=> traded at
4.8691 against the euro.
"PM Tusk has made the first direct FX intervention
comment...This is the sort of official comments we have been
looking for," said Simon Quijano from broker Cheuvreux.
But investors soon began to sell the zloty anew, testing the
prime minister's determination. At 1633 GMT, the zloty was down
to 4.9165.
Investors also said Tusk made a strategic error by naming
the level at which the government would act.
"Tusk, why say 5 for heaven's sake! Just say you are about
to start (the interventions)...you will now see 5 today," said
one FX strategist in London, who wanted to remain anonymous.
Earlier on Tuesday, central bank policymakers also moved to
talk up the zloty, with Governor Slawomir Skrzypek and fellow
rate-setter Andrzej Slawinski calling the zloty clearly
undervalued and said the economy's fundamentals should
eventually help the currency recover.
Polish economic growth slumped to 3-4 percent in the fourth
quarter of 2008 and Labour Minister Jolanta Fedak suggested on
Tuesday the jobless rate could rise to 12 percent by mid-2009.
(Additional reporting by Kuba Jaworowksi, Gabriela Baczynska
and Dagmara Leszkowicz)
