The forint rose to the strongest in a month after Standard & Poor’s raised the outlook for Hungary’s junk-rated sovereign debt to stable from negative on accelerating growth and an improving current-account balance.
The forint headed for the biggest appreciation in more than a week after Hungary’s central bank reduced the pace of interest rate cuts and signaled it may be near the end of its record rate-reduction cycle.
The forint advanced the most in more than a week after a report showed Hungary’s economy accelerated at the fastest pace in seven years, easing the need for the central bank to take more steps to boost the recovery.
Hungarian Prime Minister Viktor Orban swept local balloting yesterday, freeing him from electoral pressures until 2014. Now he can turn his attention to budget concern that has put the country’s credit-rating at risk.
Hungary’s central bank won’t return to cutting interest rates “any time soon” because of the nation’s increasing risk premium and inflation outlook, said analysts at 4Cast Ltd., Erste Group Bank AG, Concorde Securities and Citigroup Inc.
Hungary’s central bank will start a 500 billion-forint ($2.1 billion) program to boost lending to help end a recession and plans to use foreign-currency reserves to cut the country’s short-term external debt. The forint rose.
The International Monetary Fund “needs to change its position” on Hungary’s budget gap, which may be twice the target approved by the lender for this year, said Mihaly Varga , an economy official in the new government.