The Hungarian forint’s foreign exchange rate weakened as concern grew that delay to a rescue package will result in Greece missing a debt payment, eroding demand for riskier emerging market assets as Hungary sought to restart bailout talks of its own.
Hungary is the EU’s most indebted eastern member, and the Hungarian forint depreciated 0.8 percent to 293.8 per euro by 10:33 a.m. in Budapest. The forint rose to 287.8 during yesterday’s trading, the highest in more than four months, as data showed Hungary’s economy expanded more than economists expected in the fourth quarter.
Europe’s creditor countries have been struggling to reach an agreement over a rescue of Greece, seeking more control over how future aid is spent as the country faces the threat of default over a bond payment due on March 20.
Hungary will tomorrow send a reply to the European Commission that will address the disputed laws obstructing its own aid talks, without allowing those outside Hungary to “overwrite” its policies, Prime Minister Viktor Orban said today.
“The negative Greek news hurt sentiment, so the forint weakened from its four-month high,” Imre Kerekgyarto, a Budapest-based currency trader at Commerzbank AG, and colleagues wrote in an e-mailed report today. “Despite the hope that Hungary’s economy may avoid recession this year, rising risk aversion is overshadowing trading.”
Investors are wrong to assume that Hungary reaching an agreement with the IMF and EU on a financing package is a “done deal,” Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, wrote in a research report late yesterday after meeting government and central bank officials in Budapest.