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Analyst says FX loan rate cap will not harm forint

A forint-Swiss franc rate ceiling on mortgage repayments will not have a major impact on the Hungarian currency, London-based currency market analyst Ashraf Laidi said on Wednesday.

Speaking before a Buda-Cash Brokerage-sponsored forum in Budapest, CMC Markets chief market strategist Laidi said the expected agreement between banks and the government to fix a maximum exchange rate to the Swiss franc for Hungarians repaying mortgages denominated in foreign currency could have a beneficial effect on Hungary's economy.

The forint may recover the losses suffered one year earlier if borrowers continue to repay their loans and Hungary's banking system is able to absorb the losses related to the foreign exchange denominated loans.

Laidi said the forint would likely strengthen if the government demonstrates to markets that it intends to follow through with its current economic policies.

National Economy Minister György Matolcsy and the chairman of the Hungarian Bank Association are expected on Thursday to announce an agreement on measures to help troubled Hungarian borrowers of foreign currency-denominated loans.