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Forint Rallies From Worst Drop Since 2010 on IMF, Bank Deal Bets

The forint rebounded from the worst weekly decline in more than a year as speculation the government will mend ties with lenders to avert a further credit rating downgrade added to increasing appetite for risk.

The forint appreciated 2.1 percent to 307.8 against the euro by 3:42 p.m. in Budapest after posting the biggest five-day slide since June 2010 last week, paring its loss in the second half to 14 percent, still the world’s biggest decline.

Ten-year government debt rallied the most since June 8, 2010, cutting the yield 53 basis points, or 0.53 percentage point, to 9.03 percent, after a 73 basis point jump on Nov. 25, according to generic prices compiled by Bloomberg.

The government must reach an agreement with the International Monetary Fund on a credit line as the fund and the European Union are the only possible sources of a financial safety net, Economy Minister Gyorgy Matolcsy said at a press conference in Budapest on Nov. 25, after Moody’s Investors Service cut the country’s debt rating to junk. The government, which also pledged cooperation with the country’s commercial lenders, is reversing more than a year of shunning IMF aid.

“A very constructive statement by the government, hopefully it will prove sufficient to prevent further widening of spreads and currency slump,” Bartosz Pawlowski, a London-based strategist at BNP Paribas SA, and colleagues wrote in a research report today.

Credit-default swaps, derivatives used to hedge against a default on Hungary’s 5-year debt, fell to 624 basis points from a record 645 basis points on Nov. 25. The benchmark BUX index of shares rose 1.7 percent to 16,728.89.

Global stocks advanced for the first time in 11 days and commodities and the euro advanced as European leaders drafted a framework for the region’s bail-out fund and America’s Thanksgiving retail sales jumped to a record.

Hungary’s request for IMF aid may be a “strategy to buy time and alleviate some of the pressure on the market,” Guillaume Tresca, a Paris-based emerging-market strategist at Credit Agricole CIB, wrote in a research note, adding that the forint may depreciate further.

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