Forint Hits Month-High as S&P Raises Hungary Outlook to StableMarton Eder
The forint rose to the strongest in a month after Standard & Poor’s raised the outlook for Hungary’s junk-rated sovereign debt to stable from negative on accelerating growth and an improving current-account balance.
The currency appreciated 0.8 percent to 308.41 per euro by 3:13 p.m. in Budapest, the strongest since Feb. 25 and the best performance among 24 emerging-market currencies tracked by Bloomberg. The yield on Hungary’s benchmark 10-year government bonds fell six basis points to 5.65 percent, the lowest since Jan. 23 on a closing basis.
The forint pared its decline this year to 3.6 percent after S&P said “the outlook revision reflects the rebalancing of Hungary’s open economy, and what we view as steadying economic prospects.” S&P kept the rating at BB, two steps below investment grade, on par with Croatia and Portugal.
“The forint has gained momentum from S&P’s upgrade,” economists led by Zsolt Kondrat at MKB Bank Zrt., Bayerische Landesbank’s Hungarian unit, said in an e-mailed note. The ratings company centered its decision on Hungary’s improving external balance, they said.
Rising exports and the use of European Union funds may lift average growth to about 2 percent this year and next, S&P said. The surpluses in the current and capital accounts have reduced external vulnerabilities, the ratings company said.
“This is the first move since the series of downgrades that signals a change in the country’s credit prospects,” Janos Samu, a Budapest-based economist at Concorde Securities, said by e-mail. There is “a large likelihood” of further improvement in Hungary’s assessment at other rating companies in 2014, he said.
The BUX index of stocks rose 2.9 percent to the highest level since March 6, as OTP Bank Nyrt., Hungary’s largest lender, rose 2.3 percent and Mol Nyrt., the biggest refiner, advanced 5.7 percent.
The yield on Hungary’s dollar-denominated bonds maturing March 2024 dropped six basis points to 5.35 percent, the lowest since the notes were sold on March 18. Five-year credit default swaps on Hungary’s dollar-denominated debt fell 1 basis point to 236, the lowest since January 21 on a closing basis.