The one who bought the emerging markets, currency (s) at the height of the credit crisis in 2008 will have earned double digit annual interest rate drops to two years have passed since then. There are only a handful of exceptions to this rule, and the most famous of them, I think, the Hungarian forint. If you bought the Hungarian forint against the Swiss franc (base currency that most traders in forint view, for reasons which I will explain below) in the fall of 2008, will lose 63% if you sold today. Forint was down 11% a month only. This kind of numbers one might associate with mortgage-backed securities and credit default swaps, currency!
So why is forint in ob?evytâ?noj? Ironically, the answer is connected to the mortgages. In the course of inflation, housing bubble Hungarians prefer to take out in Swiss francs, because interest rates were significantly lower than the internal rate in Hungary. It's not just a trend; it is a full-blown phenomenon: "5.4 trillion (24.1 billion forint $ ), Or two thirds of Hungary as a whole home loans are denominated in foreign currency. That 82% in Swiss francs according to the Central Bank.Stable housing and credit markets, no one bothered to study foreign exchange risk. considering how many forint dropped against Frank, you can bet they are now.
If declines in housing prices was not bad, consider that the Hungarians who borrowed in Swiss francs are now seen their mortgage balances of payments will increase by more than 50%, depending on when they took their loans.It goes without saying that even in the best case, it would be difficult to find the necessary funds – let alone motivation – to pay off a loan when you throw your recession into the mix, the prospects for repayment is even bleaker. The Hungarian forint depreciated, increased credit default, further fuelling the forint depreciated and Loan defaults.
Alas Hungarian State program to address this crisis will punish banks allowing borrowers to delay payment and charging mass is the highest in the EU-a tax on all banks. Although this can be useful to reduce the deficit to 3% of the EU, it probably won't do much for the economy. Speaking of budget deficits, it made S & P to alert you to possible cut in Hungary, a sovereign credit rating of the spam status.
Cause of Hungary not assisted by negotiations with the EU and the IMF, which will be provided with emergency funding.As if there had not been seen in forint, investors are beginning to fall fear the worst and slowly turning away from Hungary. benchmark stock index fell 4 percent in the last six months.At the same time, foreign creditors begin to balk when buying Hungary debt without any IMF EU pillar, like the one that was given to Greece: "saleshave auction was barometer of investor confidence in the country. September 2, 35 billion Hungarian forint sold 12-month Treasury bills, 15 billion forint less than planned, after receipt of the application of 4 billion forint Exchange. five days later, he sold 60 billion forint three-month Treasury bills, forint 10 billion more than expected."
At this point, all eyes are on the Hungarian Government simultaneously stimulate the economy and to restore its deficit: "rating agenciesare with the same line as the markets and the provision of Government before the local elections in October for the benefit of the doubt, but if they do not see either the next IMF programs or real, concrete measures, I think they are cut the top junk."If this happens, a self-fulfilling spirals in forint is likely to continue.
It makes you wonder if Greek drachma was still around, he would remind forint?
0 comments:
Post a Comment