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Hungary May Seek Weaker Currency After Bond Sale, Nomura Says

Feb. 13 (Bloomberg) -- Hungary’s government may press for a weaker forint as it seeks ways to lift the economy out of a recession, Nomura International Plc said.

The sale of $3.25 billion of international bonds yesterday may encourage more policies labeled “unorthodox” by officials such as Prime Minister Viktor Orban, London-based economist Peter Attard Montalto wrote in an e-mailed note after meeting company executives, politicians and analysts in Budapest.

“We found increasing likelihood -- even if the Cabinet is currently split -- that the government will let the currency devalue and then mop up the mess after with policy on FX mortgages, something raised by several sources,” he said today.

Orban and Economy Minister Gyorgy Matolcsy, tipped as the new central bank chief by local media such as Index.hu, would favor a “devaluation,” a move that would be opposed by Mihaly Varga, the minister in charge of talks with international creditors, Montalto wrote.

Attempts to weaken the forint, this year’s seventh-best performer against the euro, would be accompanied by a rescue for households with debt in other currencies, he said.

The risk to the forint “is the most pressing near-term issue for the market,” according to Montalto.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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