Poland’s Zloty Weakens Most in Week on U.S. Debt Deadlock; Forint Slides
The zloty and the forint retreated the most in a week against the euro after President Barack Obama and Congress failed to reach a deal on raising the U.S.’s debt limit, fueling concern the world’s largest economy may default.
The Polish currency slid as much as 0.8 percent, the most since July 18, and traded 0.6 percent weaker at 4.0100 per euro by 4:20 p.m. in Warsaw. Hungary’s forint slumped 0.4 percent to 269.51 per euro and lost 2.1 percent to the Swiss franc.
Global stocks and oil prices fell while gold and the franc rose to record highs as the debt-ceiling impasse threatened to cause a U.S. default as early as Aug. 2 and jeopardize the country’s AAA credit rating. Last week, the forint and zloty strengthened after European leaders announced new aid for Greece in a push to prevent the debt crisis from spreading.
“Having put Greece’s problems to the side for the time being, markets are free to focus on the U.S. debt ceiling,” emerging-market strategists at BNP Paribas SA led by Bartosz Pawlowski in London wrote in a report today. “Negotiations are likely to bring us a lot of intraday volatility as investors are now clearly concerned about the U.S. rating.”
Hungary’s benchmark BUX stock index retreated 0.7 percent to 21,728.55, after earlier losing as much as 2 percent. OTP Bank Nyrt., the country’s biggest lender, led the decline with a 1.1 percent drop.
Swiss Franc
The forint traded at 233.355 per franc, about 5 forint from its all-time low of 238.455, reached a week ago, making it more expensive to repay loans denominated in the Swiss currency. The country’s economic growth may slow by as much as 0.5 percentage point if the strength of the franc versus the forint persists, Mihaly Varga, chief of staff for Prime Minister Viktor Orban, said in an interview with Gazdasagi Radio on July 22.
Sixty-three percent of Hungarian household mortgages were denominated in foreign currencies as of April 30, and more than 100,000 mortgages were overdue, according to central bank data.
“Hungarians with debt denominated in the franc are still heavily exposed to external risk factors and will remain under pressure for the foreseeable future,” Tradition Analytics wrote in a report to clients dated today.
To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
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