Forint Gains Most in Week as Economy Rebounds: Budapest Mover

The forint strengthened the most in a week after Hungary’s economy recorded its first quarterly growth in more than a year, beating estimates.

The currency had the biggest advance among more than 20 emerging-market peers tracked by Bloomberg after the statistics office in Budapest said gross domestic product expanded 0.7 percent compared with the last three months of 2012. That exceeded the 0.1 percent median estimate of eight economists in a Bloomberg survey and marked the first period of growth since the end of 2011.

The forint appreciated 0.8 percent to 291.82 per euro by 4:27 p.m. in Budapest, within 0.5 forint of the strongest since February. Yields on the government’s benchmark 10-year bonds slid 16 basis points, or 0.16 percentage point, to 5.02 percent. Today’s figures signaled the country exited recession, the Economy Ministry said in an e-mailed statement.

“The forint gained on the better-than-expected Hungarian data,” Zoltan Arokszallasi, a Budapest-based analyst at Erste Group Bank AG, wrote in a research report today. “The currency may even extend the advance in the next days or weeks unless international sentiment turns negative.”

Prime Minister Viktor Orban sacrificed growth in 2012 to reduce the budget gap and remove the threat of cuts in European Union funding less than a year before parliamentary elections. The government boosted revenue from Europe’s highest bank levy and taxes on energy, retail and telecommunication industries, which damaged lending and investments.

Current Account

The forint, which has jumped 4.2 percent in the second quarter, may rally further as investors focus on the country’s balance sheet, including its current-account surplus, Gyula Toth and Martin Blum, who help manage the equivalent of $515 million at Ithuba Capital in Vienna, said in an interview yesterday.

Hungary reported a current-account surplus of 242 million euros ($311 million) in the fourth quarter of last year, capping three quarters of surpluses.

The central bank’s Monetary Council on April 23 voted unanimously to cut the benchmark rate by 25 basis points to a record 4.75 percent, according to minutes of the meeting published on the bank’s website today.

Policy makers will only consider further rate cuts if the inflation outlook remains in line with the bank’s 3 percent target and if the improvement in financial market sentiment is sustained, the minutes showed.

Annual price growth slowed to 1.7 percent in April, the least since 1974, after a 2.2 percent increase the previous month, the statistics office in Budapest said yesterday.

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