Bloomberg News

Forint Heads for Worst Week in Seven as Hungarian Bonds Decline

May 11, 2012

The forint headed for its worst week in seven and government bonds fell as Hungary’s banks protested a planned financial-transaction tax while investors shunned riskier assets worldwide.

The currency of the European Union’s most-indebted eastern member has weakened 1 percent this week, set for its biggest slump since the five days ended March 23. It was little changed at 289.07 per euro today by 4 p.m. in Budapest. The bond selloff raised five-year yields by four basis points, or 0.04 percentage point, to 8.185 percent, the highest in more than two weeks.

Global stocks declined and most emerging-market currencies weakened today after JPMorgan Chase & Co. reported a $2 billion trading loss and China’s industrial output unexpectedly slowed. Greece’s political impasse has threatened fiscal-austerity plans and sparked concerns about the country leaving the euro.

“With the European political situation still not calming, we expect billowy conditions on the Hungarian markets,” Adam Keszeg, a Budapest-based analyst at Raiffeisen Research, wrote in a report to clients today. “The forint and Hungarian bonds are vulnerable to any negative external market reactions. Therefore, we advise remaining on the sidelines.”

OTP Bank Nyrt. (OTP), the biggest lender in Hungary, has dropped 2.5 percent this week as the cabinet approved a plan to impose a 0.1 percent tax on financial transactions. The country’s Banking Association said yesterday it wants to renegotiate the proposal, saying the plan threatens to curb lending and economic growth.

“Investors may again become anxious over the news and will likely shed Hungarian assets until the new dispute settles,” Kata Baller, a Budapest-based analyst at DZ Bank AG, wrote in an e-mail to clients today.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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