Hungarian forint gains for second day after increase in rates

The forint climbed to its strongest in a week after Hungary's central bank yesterday raised its borrowing costs for a fourth time. Policy makers lifted rates half a point to 7.75% on concern consumer-price inflation will quicken, driven by the increase of energy prices and value-added tax. „The 50 basis point increase is reassuring, as it shows the central bank is concerned about inflation,” said Barbara Nestor, an emerging-market strategist at Commerzbank AG in London. „This strengthens the currency.” Against the euro, the forint advanced 0.6% to 273.80 by 11:43 a.m. in Budapest from 275.37 late yesterday. The currency may gain to as much as 270 per euro by the end of the year, Nestor said. The currency may be also buoyed on speculation the political deadlock in Hungary will soon end. The forint slumped 2.3% last week, its biggest drop in a month, as Prime Minister Ferenc Gyurcsány faced calls to resign after criticized political elite lying about the economy in a leaked tape recording. (Bloomberg)