Forint Surges to Best Monthly Gain on Record on EU Budget Pact

The forint gained, extending the biggest monthly advance on record after European Union leaders completed a treaty on fiscal discipline which Hungary also accepted.

Hungary’s currency strengthened as much as 0.8 percent and traded 0.2 percent stronger at 294.66 per euro by 5:09 p.m. in Budapest, capping a 6.9 percent monthly appreciation, the most since at least 1999, the year the euro was introduced, and the biggest rally among more than 20 emerging-market currencies tracked by Bloomberg. The benchmark BUX stock index fell 1 percent to 18,891.07, paring its advance in January to 11 percent.

Hungary, the EU’s most indebted eastern member, will support a fiscal compact after modifications were made to the text, Prime Minister Viktor Orban told reporters in Brussels late yesterday. The backing of the Hungarian premier, who had previously said that Parliament would have to make the final decision on the accord, means only Britain and the Czech Republic boycotted the plan.

“European leaders managed to find agreement with unusual speed,” Zsolt Kondrat, a Budapest-based economist at the MKB Bank unit of Bayerische Landesbank, wrote in a research report. “The decisions can be regarded as rather positive for the future of the euro area.”

Forint Recovery

The forint has rallied this month as investors became more optimistic Hungary will obtain aid from the International Monetary Fund and the EU. The currency has jumped 8.2 percent since Orban said on Jan. 5 he was ready to discuss conditions for a “quick” deal on the bailout.

“There is more room for the recovery of the forint,” Simon Quijano-Evans, London-based economist at ING Groep NV, said in a telephone interview today. “This will be contingent on concrete action from the government.”

Hungary sold 50 billion forint ($225 million) of three-month Treasury bills at an auction today, 5 billion forint more than planned. The average yield was 7.41 percent, the lowest since Dec. 20, according to data from the Debt Management Agency.

The government’s 10-year bonds climbed, cutting the yield four basis points to 8.89 percent, extending this month’s fall to 86 basis points, according to generic prices compiled by Bloomberg.

“Government bond yields have fallen quite strongly in Hungary,” Quijano-Evans said. “For the next stage of recovery you’ll need some concrete action on the laws” the EU objected to, he added.

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