Forint Gains to Four-Week High on Orban Retreat: Budapest Mover
The forint rose to the highest in four weeks after Prime Minister Viktor Orban said he would compromise with the European Union over disputed laws to revive talks on a bailout.
Hungary’s currency appreciated as much as 1.1 percent, before trading 0.3 percent stronger at 304.08 at 5 p.m. in Budapest, the highest closing level since Dec. 21. That compares with a record low of 324.24 reached on Jan. 5. Hungarian stocks extended the longest winning streak since March 2010 and yields fell at a debt auction.
Orban is trying to revive negotiations with the EU and the International Monetary Fund after discussions broke down in December over his refusal to change a central bank law that the institutions said may weaken monetary-policy independence. The EU also threatened a lawsuit against Hungary for encroaching on the central bank’s independence and political meddling with the judiciary and the data-protection authority.
“Markets currently start pricing out a worst case scenario for Hungary as Orban shows willingness to cooperate,” Felix Herrmann, a Frankfurt-based economist at DZ Bank AG, wrote in a research report today.
Hungary sold a planned 45 billion forint ($192 million) in one-year Treasury bills at an auction today at an average yield of 8.19 percent, compared with 9.96 percent at the last sale of that maturity two weeks ago, according to auction results from the Debt Management Agency. That marked the biggest drop in borrowing costs between two auctions of that maturity since December 2008.
Hungary and the commission have only one point of disagreement remaining regarding the independence of the country’s central bank, Orban told European lawmakers yesterday.
Hungary disagrees with the commission on the lowering of the mandatory retirement age for judges, over which the European Union has threatened a lawsuit, government spokesman Andras Giro-Szasz said today in a television interview.
“It is too early to cheer,” DZ Bank’s Herrmann said. “The IMF and the EU require new reforms that will most likely lead to disputes with the Hungarian government.”
The benchmark BUX stock index rose 1.9 percent in a sixth day of gains as OTP Bank Nyrt., Hungary’s largest lender, jumped 6.8 percent.
An improvement in global sentiment also had a role in the rally besides Orban’s comments, Balint Hada, head of research at Budapest-based broker Quaestor Zrt., said by telephone, adding that the forint may strengthen beyond 300 per euro in the next week.
European stocks gained for a fourth day, extending a five- month high for the Stoxx Europe 600 Index, as Spain and France sold bonds at lower yields.
Orban had shunned the IMF since taking office in 2010 to prevent interference in what he called his “unorthodox” measures. They included the effective nationalization of $13 billion of private pension-fund assets, extraordinary industry taxes to raise revenue for the budget, Europe’s highest bank levy and forcing lenders to accept exchange-rate losses on foreign-currency mortgages
“Markets are again pricing a quicker deal,” Gyula Toth, a Vienna-based strategist at UniCredit SpA, wrote in a research report today. “Eurobonds also showed strong gains.”
Hungary’s euro-denominated notes due in July 2014 advanced for a third day, cutting the yield 73 basis points to 10.02 percent.
The cost of insuring against a default on Hungary’s debt fell to 625 basis points from 667 basis points yesterday and 691 basis points on Jan. 17. That’s the lowest this year, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers.
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