Forint Reverses Biggest Gain in 18 Months Amid IMF Uncertainty
The forint depreciated after staging the biggest rally in 18 months yesterday as the government and the International Monetary Fund sent out conflicting signals on a potential resumption of cooperation.
The currency was 0.7 percent down at 309.3 against the euro at 9:33 a.m. in Budapest. The government’s benchmark 10-year bonds weakened, lifting the yield three basis points, or 0.03 percentage point, to 8.38 percent after a 45 basis-point decrease yesterday.
An IMF team is in Budapest conducting a regular review, which is “not a negotiating mission,” Iryna Ivaschenko, the lender’s representative to Hungary, said in an e-mail yesterday. The Economy Ministry said in an earlier e-mail that the Cabinet is seeking a “new type” of cooperation after the forint plunged to a record low this week and bond yields soared to a two-year high at an auction yesterday.
“Yesterday’s seemingly contradictory communication suggests that the Hungarian government may have undertaken some ad hoc policymaking,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., wrote in a research report. “We expect increased volatility in Hungarian asset prices until the terms of any new IMF cooperation are clarified, which may take some time.”
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