Buy Forint Versus Zloty on Orban Central Bank Move, ING Says

Investors should buy the forint and sell the zloty as Hungarian Prime Minister Viktor Orban moves to guarantee the independence of the central bank, a step needed to obtain an international bailout, ING Groep NV said.

The forint depreciated 0.2 percent against the euro to 304.3 by 10:25 a.m. in Budapest, paring this month’s gains to 3.5 percent. Hungary’s currency slid 0.4 percent against the zloty to 70.65.

Orban is trying to revive bailout negotiations with the European Union and the International Monetary Fund after discussions broke down in December over his refusal to change laws that both organizations said may weaken monetary-policy independence. Orban offered to change disputed legislation after the EU threatened a lawsuit against Hungary for encroaching on the central bank’s independence and political meddling with the judiciary and the data-protection authority.

“We venture into a short zloty versus long forint recommendation on supportive comments and planned action by Prime Minister Orban” Simon Quijano-Evans, a London-based economist at ING, said in an e-mailed report today.

Hungary may obtain a loan from the IMF and the EU by March or April, Mihaly Varga, Orban’s chief of staff, told TV2 in an interview today. Orban will propose “flexible solutions” to European Commission President Jose Manuel Barroso tomorrow in Brussels to the EU executive’s objections to Hungarian laws, including on the central bank, which have held up talks on a bailout, Varga said.

‘Concrete Outlook’

“Since a Hungarian government official for the first time gave a concrete outlook on the time schedule for negotiations with the IMF, Hungarian assets should react positively today,” Kata Baller, a Budapest-based analyst at DZ Bank AG, wrote in a research report.

Orban needs to follow up his pledges to respect the independence of the central bank with “concrete steps” to restart aid negotiations, Carolin Hecht, a Frankfurt-based strategist at Commerzbank AG, wrote in a research report, adding that the market “tends to be overoptimistic regarding Hungary.”

“The communication strategy is working and until this has been disproved the forint will probably be able to defend its position,” Hecht said.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

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

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