Forint Jumps, Yields Slide to 7-Year Low as Loan Meetings Start

The forint advanced to a one-month high and yields on Hungary’s 10-year bonds hit a seven-year low as the central bank started meetings with commercial lenders to work out the details of a plan to boost loan growth.

Hungary’s currency extended last week’s gains, the biggest in nine months, after Magyar Nemzeti Bank President Gyorgy Matolcsy announced plans to provide interest-free loans to help expand credit to smaller companies. The program allayed concern of Hungary using more unconventional tools to revive economic growth, according to Siddharth Kapoor, a London-based strategist at Deutsche Bank AG.

“The central bank has stayed away from controversial or unorthodox policy, which has assuaged fears of the central bank deliberately trying to weaken the forint,” Kapoor wrote by e-mail today.

The forint gained 0.4 percent to 297.24 per euro by 4:15 p.m. in Budapest, paring losses so far this year to 2 percent. Yields on the government’s 10-year bonds fell 14 basis points, or 0.14 percentage point, to 5.878 percent, the lowest since September 2005, according to data compiled by Bloomberg.

Central bankers today met with Sandor Csanyi, chief executive officer of OTP Bank Nyrt., Hungary’s largest lender, and other commercial bankers in the first of a “regular” series of consultations, the MNB said in a statement on its website. The executives welcomed the plan, it said.

The growth program is a “very important initiative,” Mihaly Patai, the president of the Hungarian Banking Association, told reporters in a separate briefing today.

Kiraly Resigns

Julia Kiraly, a deputy president who opposed interest rate cuts carried out in each of the past eight months, resigned today. Kiraly, whose term in office was due to end in July, cited Matolcsy’s overhaul of staffing at the bank and the way he conducts Monetary Council meetings for her decision.

Demand for riskier assets has been boosted after the Bank of Japan said on April 4 it would increase its monthly bond purchases to 7.5 trillion yen ($76 billion) and as weak U.S. jobs data signaled continued debt buying by the Federal Reserve.

Global risk appetite outweighed the concerns highlighted by Kiraly, said Akos Ruzsonyi, a Budapest-based currency trader at Commerzbank AG.

“There is favorable global sentiment and relief over Matolcsy’s measures,” Ruzsonyi said.