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.”