Morliny, a meat processing company based in the northeastern town of Ostróda in Poland expects a stronger euro to boost revenue from exports and lower demand for imported goods.
"A stronger euro gives us hope for greater profitability of our exports," said Irena Stan'czak, head of Morliny's export department. The company is targeting the European Union as an export market, as do many companies - Poland sends more than 75 per cent of its exports to the Western bloc.
Last week the euro, already steadily climbing against the dollar, gained sharply following uncertainty on US financial markets. The zloty ended last week pegged at 4.04 to the dollar and 4.01 to the euro, according to National Bank of Poland figures. The zloty was 4.03 to the dollar and 3.75 to the euro a month ago.
Exporters are pleased with the development. Morliny's Stan'czak said that Poland needs a stronger euro to improve its trade balance and to spur the economy through export-led growth.
"The dollar is still too cheap, although we consider the current trend in the euro's price a green light," she said.
Although the zloty has lost about 10 per cent against the euro since the beginning of May and an additional 1 per cent last week, this trend is not sustainable, observers said.
"It is impossible to say how long this (expensive euro) will last," said a spokesperson for the central bank's Monetary Policy Council (RPP).
However it is not all good news for Eastern Europe. The strength of the Euro is a bad sign for many importers as well as key markets which are pegged to the US dollar, the spokesperson said. The German economy, which consumes the biggest chunk of Polish exports among EU member states, is affected by the US market. As a result, the euro is indirectly bound to the dollar and can be pulled down by it, the spokesperson added.
Economists had a different take. "Our analysts forecast that in the third or fourth quarter of 2002, we will see the US economy rebound," said Mateusz Szczurek, senior economist at ING Bank. That, plus higher US interest rates, would support the currency, he said.
Meanwhile, the zloty should stabilise against both currencies, he said. "It can only be influenced by rapid GDP (gross domestic product) growth, which is not likely to happen in Poland," he said of the local currency.