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Forint firms further against franc on talk of possible peg

A sharp firming of the Swiss franc against the euro last week was a cause of concern in Hungary because much of Hungarian banks' retail lending stock is denominated in CHF.

Stress tests conducted by the National Bank of Hungary last October showed the country's banking system was resilient enough to withstand a strengthening of the Swiss franc to 245 forints at the end of 2011 and to 257 forints at the end of 2012.

The forint traded at 270.70 to the euro late Monday, strengthening from 273.29 on Friday.

The forint gained to 187.34 from 191.80 against the dollar.

On the secondary market for government securities, benchmark yields were down 1-7bp for terms over a year.