Jan. 28 (Bloomberg) -- Hungary’s forint weakened for a fifth day, its longest losing streak in eight months, before central bank policy makers meet to consider a sixth consecutive rate cut tomorrow.
The currency depreciated as much as 0.9 percent to 299.99 per euro, its weakest intraday level since June 6. It traded 0.5 percent lower at 298.75 by 4:33 p.m. in Budapest, extending the decline this year to 2.5 percent.
The central bank will cut its main rate to 5.5 percent from 5.75 percent, according to 26 out of 27 economists surveyed by Bloomberg. Sandor Jobbagy, an analyst at Intesa Sanpaolo SpA’s CIB unit, forecast no change. Forward-rate agreements fixing interest costs in nine months rose 11 basis points, or 0.11 percentage point, to 4.74 percent, 97 basis points below the Budapest interbank offered rate to which it settles. The spread has retreated from a three-year high of 1.39 percent reached in December.
“Pressure increases massively on the Monetary Council to deliver a pause tomorrow,” Luis Costa, a London-based strategist at Citigroup Inc., wrote by e-mail today. “A cut tomorrow might send euro-forint even higher.”
Hungary should use further monetary easing “very cautiously,” the International Monetary Fund said in a statement today after a regular review of the country’s economy. Hungary will probably overshoot its budget deficit targets through 2015 and needs a shift in policy to make fiscal consolidation sustainable and to boost growth, the IMF said.
The forint has depreciated 3 percent against the euro since Economy Minister Gyorgy Matolcsy said last month the next governor should “bravely use unorthodox tools” to help the economy recover from its second recession in four years. Matolcsy is the most likely successor after Magyar Nemzeti Bank President Andras Simor’s term ends in March, according to the Index and hvg.hu news websites.
Weakening economic growth indicators, such as a faster-than-expected drop in retail sales, will probably move the central bank to cut rates tomorrow, said Daniel Hewitt, a London-based economist at Barclays Plc.
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