Bloomberg News

Forint Weakens to 2009 Low on European Crisis, Rating Concern

October 20, 2011

Oct. 20 (Bloomberg) -- The forint slid to its weakest level in 2 1/2 years versus the euro as a split emerged among European leaders on how to stem the region’s debt crisis, and speculation rose that Hungarian debt may be downgraded to non-investment grade.

The Hungarian currency depreciated as much as 1.7 percent to 301.03 per euro, its weakest intraday level since April 2009, and traded 1.5 percent weaker by 5:37 p.m. in Budapest. Poland’s zloty slumped 1.5 percent to 4.4050 per euro and the Czech koruna retreated 0.8 percent to 25.065 against the common currency.

“Markets in the European time zone are getting more and more worried about the outcome of this weekend’s summit,” BNP Parbias SA strategists wrote in a report today. “We believe that central and eastern European currencies will be unable to develop any significant appreciation.”

Stocks and commodities fell after Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, indicated an impromptu meeting in Frankfurt yesterday failed to resolve differences ahead of this weekend’s summit.

“Yesterday’s ‘emergency meeting’ in Frankfurt does not appear to have yielded significant results, which means that the growth outlook for the central and eastern Europe, Middle East and Africa region is getting worse by the day,” strategists led by Bartosz Pawlowski in London wrote in the BNP note.

Credit Ratings

Hungarian bonds fell for a fourth day and the government sold less than the planned amount of debt at an auction today after Danske Bank A/S cut the debt to “underweight” from “overweight,” citing an economic slowdown and risks the European Union’s most-indebted eastern member will have its rating downgraded. The country is rated one step above junk at Moody’s Investors Service, Fitch Ratings and Standard & Poor’s.

The bond rout lifted the yield on the benchmark 2022 notes in forint up 10 basis points, or 0.1 percentage point, to 8.015 percent, compared with 7.69 percent at the end of last week.

“We have now moved significantly negative in respect of Hungary,” Lars Christensen and Antero Atilla, Copenhagen-based analysts at Danske Bank, wrote in a report to clients yesterday.

--Editors: Linda Shen, Peter Branton

To contact the reporter on this story: Krystof Chamonikolas in Prague at

To contact the editor responsible for this story: Gavin Serkin at

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