Hungary’s central bank kept interest rates unchanged for a ninth month, saying the European debt crisis raised the country’s borrowing and risk costs and pressured the forint, justifying “a wait-and see” approach.
Emerging-market currencies rallied and the lira jumped from a record low after policy makers in Turkey and Russia stepped up sales of foreign-currency reserves to counter a selloff in developing-nation assets.
The sell-off in emerging-market currencies is reminiscent of declines in the seven- to eight- month period around Lehman Brothers Holdings Inc.’s collapse in 2008 and probably has further to run, Nordea Bank AB said.
The zloty tumbled to the weakest level in more than two years and bond yields rose amid concern Europe’s economic slowdown will curb Polish growth and scupper the government’s attempt to cut the budget deficit.
The forint dropped to the lowest in two months as talks between the Hungarian government and lenders on a plan to fix exchange rates on mortgages added to concern that Europe’s debt crisis is worsening. Stocks slumped.
The forint tumbled to the weakest level in 14 months and the cost to insure Hungary’s debt against default soared as the International Monetary Fund and European Union ended talks without endorsing Prime Minister Viktor Orban’s plans to control the budget deficit.
The euro traded at its strongest level against the dollar in more than two months on growing optimism the currency region will overcome its debt crisis as economic recovery takes hold and German inflation accelerates.
Bronislaw Komorowski received fewer votes than expected in Poland’s presidential elections, setting up a runoff with Jaroslaw Kaczynski that may determine the pace of euro adoption and deficit reduction.