Forint Gains to Near 11-Month High on Europe Debt Crisis Bets

The forint strengthened for a second day against the euro to near the strongest in 11 months and Hungarian government bonds gained on speculation the European debt crisis will ease.

The currency of Hungary, the most indebted eastern member of the European Union, appreciated 0.6 percent to 275.20 per euro by 4:13 p.m. in Budapest, after hitting 274.46 earlier today, the strongest since Sept. 7. The government’s notes maturing in 2015 rallied, cutting yields 16 basis points, or 0.16 percentage point, to 6.875 percent.

European stocks gained and the euro climbed on speculation the region’s leaders can make progress at meetings on Greece’s debt crisis. Germany’s Bundesbank stepped up its criticism of the European Central Bank’s plan to embark on potentially “unlimited” government bond purchases.

“Sentiment may be determined by the news from the European leaders’ meetings and the row between the ECB and the Bundesbank,” Karoly Bamli, a Budapest-based trader at Commerzbank AG, and colleagues wrote today on the forint’s strength.

Hungary sold a planned 45 billion forint ($204 million) of three-month Treasury bills at an auction today, at an average yield of 6.85 percent, matching the cost of borrowing at a sale on Aug. 7, which was the lowest since November for that maturity.

Hungarian yields have fallen “mostly due to external factors,” Andras Sovany, a Budapest-based trader at ING Groep NV, wrote in an e-mailed response to questions from Bloomberg today, citing drops in Spanish yields.

The Treasury in Madrid sold 4.51 billion euros ($5.6 billion) of bills today, in line with the 4.5 billion euros sought. The yield for 12-month bills fell to 3.07 percent from 3.918 percent at the last sale on July 17. Yields on 18-month bills fell to 3.335 percent from 4.242 percent last month.

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