The forint strengthened to its highest level in three weeks as German industrial production rose for a second month and an unexpected acceleration in China’s external trade growth boosted riskier, emerging-market assets.
Hungary’s forint dropped to a nine- month low as falling inflation stoked prospects for interest- rate cuts and lawmakers backed constitutional changes some European Union members say undermine democracy.
The forint headed for the longest series of weekly declines in almost 18 months and bond yields rose as Standard & Poor’s cut the outlook on Hungary’s junk- grade credit rating to negative from stable.
Hungary’s central bank will probably lower its benchmark interest rate to a record low as investors focus on the possibility of new President Gyorgy Matolcsy deploying unconventional measures to end a recession.
Russia’s next central bank chairman will have scope to meet Vladimir Putin’s call for lower borrowing costs as yields on the shortest-maturity debt fall and economists predict the fastest inflation in 18 months will ease.
Hungarian assets are “cheap” because the government will probably obtain a financing agreement from the International Monetary Fund and the European Union, London-based Citigroup Inc. strategist Luis Costa said.
Hungary may need to sell foreign- currency reserves to stem the forint’s decline to an all-time low versus the euro as lifting interest rates would be a “shot in the head” as the economy slows, Citigroup Inc. said.