Forint May Extend World’s Best Gain on IMF Aid, Nordea Says

The forint may extend the world’s biggest rally this year as the government works to obtain aid from the International Monetary Fund, Nordea Bank AB said today.

Hungary’s currency gained 0.5 percent to 281.98 per euro by 4:27 p.m. in Budapest, bringing its appreciation this year to 12 percent, the best among more than 100 currencies tracked by Bloomberg. Yields on the government’s benchmark 10-year bonds fell five basis point, or 0.05 percentage point, to 7.175 percent, the lowest since Sept. 2011.

Hungary would like to reach an agreement with the IMF even though the country can finance its debt without financial aid, government spokesman Andras Giro-Szasz said in an interview on public television M1 today. If the pact comes about it would help stabilize the country’s credit rating after it was cut to junk, Frank Gill, an analyst at Standard & Poor’s, said in Vienna today.

“The forint will likely keep gaining against the euro in the next three months,” Aurelija Augulyte, a Copenhagen-based analyst at Nordea, wrote in a research report today.

The government, which requested the bailout almost 11 months ago, has yielded to demands from the IMF and EU to scrap laws which threatened the independence of the central bank. Prime Minister Viktor Orban won’t give in to what he says are demands for “austerity” measures by the IMF, according to advertisements run in newspapers yesterday.

The negotiations “will likely not be easy as Orban’s government is not willing to compromise on all IMF conditions,” Nordea said. “But it is moving forward so far.”

There’s no evidence yet that Hungary is making progress with the IMF and the rating impact of a potential deal would depend on whether the government complies with aid conditions, S&P’s Gill said. The Cabinet has “no credible medium-term fiscal adjustment” plan after budget steps based on one-time measures in the past two years, he said today.

Fitch reduced Hungary’s rating to BB+ in January, after S&P in the previous month had assigned the same ranking, the highest non-investment grade, and Moody’s Investors Service cut it to Ba1 in November.

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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