The Polish zloty (PLN) is the national currency used in Poland. A single Polish zloty is subdivided into 100 groszy and is often represented by a symbol that looks like the lowercase Latin letters “zl” with a stroke about halfway up the “l.” It is a freely floating currency that trades on forex markets.
The currency dates back to the early 20th century, but has gone through several iterations as the political economy of the country has shifted.
Breaking away from communism in the 1990s caused rampant inflation in Poland, making only denominations of 500,000 and 1 million usable.
As of Aug. 2021, the exchange rate of PLN to USD is roughly 4-to-1.
The modern Polish zloty dates back to 1919 but was not circulated until 1924. Banknotes of the currency are issued in denominations of 10, 20, 50, 100, and 200, while coins circulate in denominations of 1, 2, and 5.
Only the Narodowy Bank Polski (NBP), the Republic of Poland’s central bank, may issue the PLN (Polish zloty). In addition to banknotes, the NBP also mints coins for both general circulation and collectors. The regulations stipulating the release of coins and notes are laid out in the Monitor Polski, a publication of Poland’s prime minister.
The NBP bears responsibility for maintaining price stability. Since 2004, the central bank strived to limit inflation to a target rate of 2.5%, plus or minus 1%. According to the World Bank, in 2020, a year marred by the outbreak of COVID-19 and related lockdown measures, Poland experienced 4.1% annual inflation and had a gross domestic product (GDP) growth rate of -2.7.
The conditions of Poland’s entry into the European Union (EU) in 2004 required the eventual adoption of the euro. However, the country still has not set a target date for conversion to the EU’s currency and the rise to power of euro-skeptic political parties in the Polish parliament appears to make such a move unlikely in the near term.
In forex markets (FX), the most common pairings for the Polish zloty in currency trades tend to be the U.S. dollar (USD), the euro (EUR), the Swiss franc (CHF), the British pound (GBP), and the Australian dollar (AUD).
Since the early 2000s, the PLN exchange rate has typically traded between two PLN to one U.S. dollar to over 4.5 PLN to one U.S. dollar. However, it has not traded at two PLN since the Great Recession in 2008 and for the past several years has ranged between three to four PLN to the dollar.
The word zloty is the masculine version of golden.
The Polish zloty’s name comes from zloto, the Polish word for gold, and traces its existence back to the Middle Ages. The current Polish zloty marks the currency’s fourth iteration.
During the first zloty period of the 14th and 15th centuries, the word zloty initially indicated any gold coin. The zloty became the official currency in 1528, and it remained legal tender until 1850. At this point, the Russian ruble then the Polish marka replaced the zloty.
1924 saw the introduction of the second zloty. Years of hyperinflation after World War I caused the conversion rate of 1 zloty to 1,800,000 markas. The PLN had pegged to the U.S. dollar. Ongoing economic crisis and inflation continued to haunt the Polish currency. Through World War II and later Soviet occupation, the country continued printing and using the zloty.
In 1950, the replacement of all existing Polish zloty (PLN) began the third zloty period. Hard financial times continued for the country forcing Poland into debt lasting until 1994. These notes carried the symbol PLZ. As Poland transitioned away from the Communist party with the collapse of the Soviet Union and into a free market economy, inflation soared. As a result, for a brief time in the 1990s, there were denominations of 500,000 and 1 million zloty. Once inflation subsided, the larger denominated notes were no longer needed and were converted into smaller denominations.
During the fourth zloty period, the government exchanged new banknotes for the existing currency. However, the early issued new notes were easy to counterfeit. In 1995, the redenomination of all money happened, and the old PLZ ceased to be legal tender.