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Franc more important than euro

If the euro/forint pair “flirts” with the 290 level for too long, this could be a “dangerous trigger” for the National Bank of Hungary (MNB), but the Swiss franc/forint (CHF/HUF) level is likely to count more at this juncture, a major global investment consultancy said as CHF/HUF hit a new record high at 226.

TD Securities said in a note released in London that with CHF-denominated loans held by households and non-financial firms making up for a fifth of Hungary’s GDP, the weak forint is a major issue threatening the stability of Hungary's banking sector and, if the slide continues, “this alone could convince more forint bears to increase the already popular long CHF/HUF positions”.

“We think the government cannot afford the cost of going against the tide and will have to negotiate again with the IMF if market remains risk off for long while the forint extends losses to the Swiss franc ... (Prime Minister Viktor) Orbán will try to resist until October 3 (local elections), but may have to capitulate earlier if things get ugly”, TD Securities says. (MTI – Econews)