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UPDATE 1-Polish c.bank head sees zloty strengthening-report

Published 06/15/2010, 01:27 AM
EUR/PLN
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* Says fundamentals support zloty strengthening

* No immediate inflationary risks

* Long-term zloty weakening could increase inflation (Adds details, quote, background)

WARSAW, June 15 (Reuters) - Poland's new central bank governor, Marek Belka, expects the zloty to strengthen, driven by the recovering economy and its convergance with the European Union, a newspaper on Tuesday quoted him as saying.

Belka added a longer term weakness of the zloty could fuel a rise in inflation, but remained optimistic that in near future there were no risks that could fuel a rise in prices.

"All signs show that the zloty should strengthen," Belka told Rzeczpospolita daily. "For 20 years the zloty is in an appreciation trend. It is a result of ongoing economic growth and is a phenomenon tied to our convergence with developed economies."

The zloty has been weakening on the back of investors' worries that Greece's debt crisis will spread to other weaker European states.

Belka was approved as central bank chief on June 11 to replace Slawomir Skrzypek, who died in a plane crash in western Russia along with the President Lech Kaczynski and many other high officials on April 10.

European Union's largest ex-communist economy was the only one to avoid recession during the global crisis and it has picked up steam in the first quarter with a 3 percent expansion. Economists expect this year's expansion to reach 2.9 percent.

The central bank's 10-strong monetary policy panel has kept the key interest rate on all-time low level of 3.5 percent since June 2009. (Reporting by Patryk Wasilewski)

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