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Hungary's Forint, Stocks Fall on Recovery Concern, Before Orban Speech
Hungary’s forint fell the most in a week against the euro and stocks slid as Prime Minister Viktor Orban prepared to speak on his first 100 days in office and concern deepened Europe’s debt crisis will hinder the global recovery.
The forint lost 0.6 percent, the most among more than 20 emerging-market currencies tracked by Bloomberg, to 286.49 per euro at 2:30 p.m. in Budapest. The BUX stock gauge declined 1.5 percent, led by a 3.1 percent plunge for OTP Bank Nyrt., the nation’s biggest lender.
Banks led declines in European stocks as the Association of German Banks said the country’s 10 biggest lenders may need about 105 billion euros ($135 billion) in fresh capital to meet new regulations. The forint depreciated to within less than 2 forint of last week’s record-low versus the Swiss franc, increasing the risk Hungarians with foreign-currency mortgages may default.
“The most important cross we continue to keep an eye on is still franc-forint, which jumped back close to all-time high levels,” Dmitry Gourov and Gyula Toth, analysts at UniCredit SpA in Vienna, wrote in a report today.
The forint weakened 1.6 percent against the Swiss franc to 222.169, compared with the all-time intraday low of 223.445 on Sept. 1. About 5.4 trillion forint ($24 billion), or two-thirds of Hungary’s overall household credit, is denominated in foreign currencies. Of that, 82 percent is in Swiss francs, according to central bank data.
‘Very Risky’
Orban is expected to speak today at 3 p.m. in Budapest to evaluate his first 100 days in office. His administration suspended talks with the International Monetary Fund and European Union in July after the government refused to commit to narrowing the budget deficit in 2011. In 2008, Hungary became the first EU member to receive an international bailout.
“We should expect more of the same from him without any consoling tone towards the IMF,” London-based analysts at BNP Paribas SA wrote in a report to clients today. “It is a very risky thing to do with franc-forint back above 220.” The bank said it recommends selling the forint “on any rally.”
OTP Bank fell for the first time in three days. Mol Nyrt., Hungary’s biggest oil company, lost 1.3 percent to 21,410 forint as oil declined. The two companies have a combined 54 percent weighting within the BUX index.
Hungary today raised 60 billion forint in three-month debt, exceeding its 50 billion-forint target, as the average accepted yield rose to 5.53 percent from 5.47 percent at the previous auction of the same maturity on Aug. 31. Hungary failed to sell the planned amount of 12-month debt on Sept. 2 as concern the central bank might raise interest rates damped investor demand.
To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net
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