Forint Gains 4th Week, Default Swaps Fall on IMF: Budapest Mover

The forint appreciated a fourth week and default swaps fell to the lowest in almost a year as investors speculated the government will reach an aid agreement with the International Monetary Fund and the European Union.

Hungary’s currency strengthened 1.4 percent to 277.77 per euro by 4:54 p.m. in Budapest, bringing its weekly advance to 1.1 percent. The forint was the best performer today among more than 20 emerging-market currencies tracked by Bloomberg. The cost of insuring Hungarian debt with credit-default swaps fell 19 basis points to 448, the lowest level since September 2011.

“The forint-euro exchange rate continues to price an EU/IMF standby loan soon,” Gergely Palffy, a currency strategist at Buda-Cash Brokerhaz Zrt, wrote in a report today.

The IMF wrapped up a week of “constructive” loan talks in Budapest, the lender said on July 26. Hungary’s government, which is targeting an agreement by the end of October, said negotiations will continue in September. Hungary may be ready to change the financial transaction tax, which the European Central Bank said would violate the Hungarian central bank’s independence, if arguments presented against the levy are “convincing,” government spokesman Andras Giro-Szasz told TV2 yesterday.

Government bonds rallied the first day in three, cutting the yield on benchmark 2022 forint notes by 10 basis points, or 0.1 percentage point, to 7.42 percent.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net