Romanians have to pay back loans in Swiss francs (mainly mortgage loans) worth the equivalent of EUR3.2 billion. Those who have somehow managed to pay their installments so far might have to make even greater efforts in the months to come.
Because volumes traded in Swiss francs are marginal on the Romanian market, the central bank (BNR) calculates the exchange rate based on international euro/franc rates and based on leu/euro Bucharest rates. Yesterday, the Romanian central bank set the franc’s exchange rate at an all time high against the leu, of RON3.6941, 1.2% stronger than in the previous day.
Although in Bucharest the leu to euro rate was relatively stable at around RON4.27 per euro, the appreciation of the franc was determined by its trend on international markets, where it hit a fresh all-time high against the single currency, at CHF1.1575 to the euro.
But the franc is not set to lose steam yet. The London office of Dutch bank ING released Thursday a shock forecast: the franc will strengthen in the second part of the year to 1.1 units for the euro. This would mean that if the euro stays around RON4.27, the franc would climb towards RON3.9.
As the state treasuries, which according to economics textbooks should be among the less riskier investments, have ended up being traded for unpredictable prices, investors are taking refuge in gold and Swiss francs, the only remaining safe havens.
The forecasts of ING are, at least for now, more pessimistic than those of other international banks. Societe Generale, RBS and Citi expect the franc to see a correction, but a very slight one – the franc is set to return to above 1.2 units to the euro over the coming months.
“The future performance of the franc is linked to the resolution of fiscal problems in the euro zone and in the US,” says Dan Bucsa, chief economist of UniCredit Tiriac Bank. “Swiss financial markets are neither very sophisticated nor very liquid compared with those in the euro zone, the US, and Japan, so any increase in the risk appetite on international markets would lead to a weakening of the franc.” UniCredit sees the franc at 1.32 units to the euro by yearend.