Bloomberg News

Forint Snaps 2-Day Rally as Hungary Set to Pose IMF Conditions

September 17, 2012

The forint snapped two days of advances as Hungary’s government prepared to unveil conditions it would accept as a basis for negotiating a bailout deal with the International Monetary Fund and the European Union.

The currency of Hungary, the most-indebted eastern member of the EU, depreciated 0.7 percent to 283.16 per euro by 4:42 p.m. in Budapest. The yield on the government’s benchmark 10- year bonds rose six basis points, or 0.06 percentage point, to 7.346 percent. The forint has gained 0.4 percent so far in September, almost one percentage point less than the koruna and compared with a 1.5-percent rally in the zloty.

Hungary will send its proposals to the IMF within two days, Mihaly Varga, the government’s chief negotiator, told reporters in Budapest today after Prime Minister Viktor Orban said Sept. 6 that Hungary rejects conditions set by the IMF for a loan. Aid talks may resume next month, later than earlier expected, Varga said in an interview in Warsaw last week.

“The fact that talks can come to motion again may give some further support for Hungarian assets, but only in the case that the external environment remains friendly,” Andras Oszlay, a Budapest-based analyst at DZ Bank AG, wrote in an e-mailed note today. “Otherwise markets are keener to see deeds instead of just talks.”

The governing Fidesz party will delay the vote on the 2013 budget to allow time for feedback from the IMF talks, Antal Rogan, the head of the party’s lawmakers in parliament, told reporters today.

While the delay in the budget vote may help obtain the credit line, there remains doubt whether the Cabinet is willing to strike a deal, Balint Torok, an analyst at broker Buda-Cash wrote in an e-mailed report today.

The aid talks halting can “never be ruled out,” Varga said today, adding that the government isn’t prepared to “directly” increase the burden on the population as part of an IMF aid agreement.

The uncertainties about the 2013 budget and the IMF talks “point toward forint weakening,” Zoltan Arokszallasi, a Budapest-based economist at Erste Group Bank AG, wrote in a research report today.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

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


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