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Forint Gains as Obama Victory Boosting Risk Appetite Cuts Yields

The forint gained and Hungarian bond yields fell as U.S. President Barack Obama’s re-election increased demand for riskier assets and investors awaited the European Union’s verdict on Hungary’s budget-deficit reduction measures.

The currency of Hungary, the European Union’s most indebted eastern member, appreciated 0.3 percent to 281.33 forint by 9:55 a.m. in Budapest. Yields on the government’s benchmark 10-year bonds fell three basis points, 0.03 percentage point, to 6.876 percent.

Obama’s victory over Republican Mitt Romney increases the odds the U.S. Federal Reserve will continue with its bond purchases that are designed to boost the world’s largest economy. A report by the European Commission today may indicate whether Hungary faces an escalation in sanctions for exceeding the EU’s budget deficit limit of 3 percent.

“The forint has gained on Obama’s victory,” Gergely Palffy, an analyst at Buda-Cash Brokerhaz Zrt., wrote in an e-mailed report today, citing the expected continuity in Fed policy and the end of uncertainty caused by the campaign.

“It would be very important to get a positive signal from the Commission that acknowledges the government’s efforts are sufficient to keep the deficit below 3 percent sustainably,” Karoly Bamli, a Budapest-based trader at Commerzbank AG, wrote in an e-mail today.

The forint may gain to 280 per euro if the global sentiment persists and the news from the EU on Hungary is favorable, he said.

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