The forint weakened the most in a week and Hungarian bond yields rose on speculation the U.S. Federal Reserve may slow the pace of bond purchases that boosted demand for higher-yielding assets.
Hungary’s currency depreciated after minutes of the Fed’s Jan. 29-30 meeting sparked concern the U.S. may curtail stimulus measures. The slump deepened after a German report showed that manufacturing in Europe’s biggest economy and Hungary’s biggest export destination expanded less in February than analysts projected.
“The Fed minutes spoiled sentiment on markets,” Imre Kerekgyarto and Karoly Bamli, Budapest-based traders at Commerzbank AG, wrote in an e-mail today. “The downturn in markets began to be reflected in the forint this morning.”
The forint slid 0.6 percent to 292.9 per euro by 10:16 a.m. in Budapest. Yields on the government’s benchmark three-year bonds rose five basis points, or 0.05 percentage point, to 5.428 percent, snapping three days of declines.
Several Fed policy makers said the central bank should be ready to vary the pace of its $85 billion of monthly bond purchases, according to minutes of the meeting released yesterday.
The forint jumped 8.1 percent last year, the second-biggest advance among more than 100 currencies tracked by Bloomberg, after the Polish zloty, as Fed bond purchases channeled funds toward riskier assets.
Markit Economics said its index of German manufacturing based on a survey of purchasing managers was 50.1 this month compared with 49.8 in January. Economists surveyed by Bloomberg forecast the gauge would increase to 50.5. A reading above 50 signals expansion.
The Debt Management Agency plans to sell 43 billion forint ($194 million) in bonds maturing in 2016, 2018 and 2028 at an auction today, according to data from the agency on Bloomberg. It’s the first sale of 15-year debt in two months.
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