Bloomberg News

Zloty Has Record Gain Versus Franc as Swiss Set Currency Limit

September 06, 2011

Sept. 6 (Bloomberg) -- The zloty had the steepest gain against the franc on record after the Swiss central bank imposed a ceiling on the franc, helping to reduce payments for most Polish mortgage holders.

The zloty surged 7.9 percent to 3.5247 per franc as of 5:20 p.m. in Warsaw. The appreciation is the most since at least March 1998, according to data compiled by Bloomberg. The zloty eased 0.3 percent to 4.2339 per euro, its fourth day of declines. The yield on notes maturing in April 2016 fell nine basis points to 4.85 percent.

Polish homeowners who bought property with foreign-currency loans had faced an increase in costs because of the franc’s advance against the zloty, raising the potential for defaults. The Swiss National Bank set a minimum franc exchange rate for the first time in more than three decades and pledged to defend the target with the “utmost determination.”

“The news has been read as positive,” BNP Paribas SA economists in London wrote in a note to clients. “It will help to ease some of the burden of debt repayments of franc-indebted households.”

The total value of franc-denominated home loans in Poland reached 162.2 billion zloty ($51.9 billion) at the end of July and represented 54 percent of all mortgages outstanding, according to the financial market regulator’s website.

Poland will benefit from the “excellent news” of the franc ceiling, ING Groep NV said. The decision will “soon” help the zloty strengthen to 4.15 per euro, Mateusz Szczurek, chief economist for central and eastern Europe in Warsaw, wrote in an e-mailed note to clients.

--Editors: Linda Shen, Peter Branton

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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