The move created havoc in trading in the forint and other regional currencies, plunging the forint to an historic low of 326 per euro, before recovering to near 321 later.

The forint plummeted to 378 against the franc from 266 in the morning and was trading at 320 later in the day, a decline of 19%.

Analysts around the globe were caught off guard by the Swiss announcement. There is a consensus that volatility will remain high, but the impact on the Hungarian economy will be limited.

The extreme strengthening of the Swiss franc will not affect foreign-currency mortgage debtors, as the government set a fixed rate for the conversion of these loans last year.

Banks and borrowers would be in deep, deep trouble had that conversion not happened, commented Concorde analyst János Samu, as the 15-20% decline in the forint’s value would have pushed borrowing costs up by Ft 500 billion.

The conversion rates were set at Ft 256.5 per Swiss franc and Ft 309.5 for euro-denominated loans.

After the fixed-rate conversion, Ft 3.4 trillion worth of foreign-currency mortgage loans, most of them denominated in Swiss francs, were phased out.

Those with car loans denominated in Swiss francs are not so lucky, as they will see their monthly instalments balloon.

Source: Hungary Around the Clock

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