Forint set for weekly gain as foreigners buy Hungarian bonds

The forint is the second best performer this week among the 71 currencies tracked by Bloomberg, following the Slovak koruna. Both countries offer higher returns from investing in local currency government bonds than German debt. The forint reached its highest in eight months versus the euro this week as inflation, the fastest in the European Union, quickened to a two- year peak last month. “The forint gained as people are buying high-yielding currencies,” said Barbara Nestor, an emerging markets strategist at Commerzbank AG in London. “And the yields in Slovakia and Hungary are fairly attractive.” Against the euro, the forint rose 1.1% on the week to 257.57 at 10:32 a.m. in Budapest. It may reach 257 next week, Nestor said. Annual inflation was 6.3%, the highest since October 2004, compared with 5.9% in September. The forint has gained 3% in the past six months as Hungary's inflation rate has almost tripled, exerting pressure on the central bank to raise rates for a sixth time since June. The foreign holding of Hungarian debt rose by 1% in the past week to a total 2.8 trillion forint, according to the government's Debt Management Agency. The Hungarian benchmark ten year government bond yields 315 basis points more than similar maturity German government debt. A basis point is 0.01 percentage point. (Bloomberg)