The forint strengthened to a three- week high as Hungary’s government cut the budget deficit and reiterated its rejection of currency devaluation as a way to boost the economy.
The currency advanced for a fourth day after data showed yesterday that the fiscal gap came in at 2.1 percent of gross domestic product in 2012, below the European Union’s 3 percent limit. There are enough budget reserves to weather risks this year, Economy Ministry State Secretary Zoltan Csefalvay said today. Economy Minister Mihaly Varga opposes devaluing the forint to increase exports and wants a stable currency, the Wall Street Journal reported yesterday.
“The government has signaled they don’t want to create uncertainty and forint weakness, their communication has become more open toward investors,” Andrej Taraczky, head of currency trading at Buda-Cash Brokerhaz Zrt., said by phone from Budapest today. The improvement in the budget has also helped support the forint, Taraczky said.
The forint climbed 0.5 percent to 300.55 per euro by 11:41 a.m. in Budapest. Yields on the government’s benchmark 10-year bonds fell 14 basis points, or 0.14 percentage points, to 6.13 percent.
“The favorable budget deficit data may be a good basis for forint appreciation,” Imre Kerekgyarto, a Budapest-based trader at Commerzbank AG, wrote by e-mail today.
The forint has gained 1.8 percent since Hungary’s central bank urged caution in monetary easing after cutting the benchmark rate by 25 basis points to a record low 5 percent on March 26.
While the government “clearly prefers” lower rates, the central bank’s easing may be approaching a point which causes a selloff in some bonds, Varga said, according to the Wall Street Journal report.
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