Forint Gains to 3-Week High as Risky Assets Rise: Budapest Mover

The forint strengthened to its highest level in three weeks as German industrial production rose for a second month and an unexpected acceleration in China’s external trade growth boosted riskier, emerging-market assets.

The currency appreciated on anticipation an improvement in the world economy will help Hungary emerge from recession. Germany’s output increased 1.2 percent in March, the Economy Ministry in Berlin said today. Economists forecast a 0.1 percent decline, according to the median of 40 estimates in a Bloomberg News survey. Economic growth in Hungary, which is in its second recession in four years, may reach 1 percent this year, state-run news service MTI reported late yesterday, citing Prime Minister Viktor Orban.

“Sentiment has improved, the concern about the euro area crisis has eased and data from overseas signaled the world is heading for a more favorable economic path,” Pal Saaghy, a Budapest-based currency trader at broker Equilor Befektetesi Zrt., said in a telephone interview today.

The currency appreciated 0.8 percent to 293.71 per euro by 3:51 p.m. in Budapest, extending its gain in the second quarter to 3.6 percent, the best performance among more than 100 currencies worldwide tracked by Bloomberg. Yields on the government’s benchmark 10-year bonds fell five basis points, or 0.05 percentage point, to 5 percent.

Chinese imports advanced 16.8 percent, exceeding analysts’ estimates for 13 percent growth, while exports surged 14.7 percent, data from the General Administration of Customs showed.

Fastest Pace

Orban said Hungary will be growing at the fastest pace in central Europe by the time of elections in 2014, MTI reported. Orban’s comments helped lift the forint, analysts at the broker unit of KBC Groep NV wrote in an e-mailed report today.

The government’s relations with commercial banks are now more constructive, Radovan Jelasity, chief executive officer of Erste Group Bank AG’s Hungarian unit, said at a conference. This comment also benefited the forint, the KBC analysts said.

Hungary’s inflation rate falling below the 3 percent target is allowing the central bank to focus on growth, Magyar Nemzeti Bank Vice-president Adam Balog told a conference in Budapest today.

Hungary offers the “best long-end real yields in the region,” which supports the forint, Luis Costa, a London-based strategist at Citigroup Inc., wrote by e-mail today.

“We are now lacking catalysts for the next big move up in euro-forint,” Costa wrote.

The cost of insuring against default on Hungary’s debt with credit-default swaps fell one basis point to 272, the lowest on a closing basis since Jan. 11, according to data compiled by Bloomberg.

A 10 percent reduction in utility prices imposed by the government in January, and plans for further price cuts, will have a “powerful impact on sentiment and purchasing power” of consumers, Raffaella Tenconi, a London-based economist at Bank of America Corp., wrote in a research report today.

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