Forint Weakens Third Day to Lowest in a Month on Growth Concern
The forint dropped to the lowest in a month as data from Asia to Poland added to evidence global growth is slowing two days after Hungary’s central bank cut the European Union’s highest benchmark rate.
Hungary’s currency depreciated 0.7 percent to 285.56 per euro by 4:58 p.m. in Budapest, extending its slide to 2.8 percent since the Magyar Nemzeti Bank unexpectedly reduced its base rate by 25 basis points to 6.75 percent. Yields on the government’s benchmark five-year notes were little changed at 7.112 percent.
Poland’s gross domestic product grew 2.4 percent in the second quarter from a year earlier, the Warsaw-based Central Statistical Office said today, below the 2.9 percent median estimate of 34 economists surveyed by Bloomberg. Japan’s retail sales fell 0.8 percent in July from a year earlier, more than economists forecast. In South Korea, confidence among manufacturers stayed near the lowest level since the global financial crisis.
“The forint is weakening for a third day on the back of Tuesday’s interest rate cut,” Zsolt Kondrat, a Budapest-based analyst at Bayerische Landesbank’s MKB Bank unit, wrote in an e- mailed note today. Kondrat also cited concern over the Japanese retail sales data and a downturn in sentiment in eastern Europe’s markets.
Hungary’s government said this week it is considering a cut in value-added tax on basic food items and may buy local units of EON AG, Germany’s biggest utility, to help cut food and energy costs for households. The comments added to the forint’s slide as the potential moves may threaten the nation’s budget goals, according to Commerzbank AG.
“The market jitters haven’t been only caused by the interest rate cut but also by the concern that the government won’t be able to make up for the lost revenue and additional expenditure for these measures,” Peter Karsai, a Budapest-based trader at the bank, wrote by e-mail today.
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