Forint, zloty, lira advance as emerging-market concern eases

Hungary's forint, Turkey's lira and the Polish zloty advanced for a second day, the first back-to-back gain in three weeks, as policy makers acted to counter concerns about riskier emerging-market assets. Hungary's central bank may raise interest rates again after doing so last week because of a weak currency, spokesman Gábor Missura said yesterday. Turkey increased borrowing costs at an emergency meeting last week and is holding daily auctions to borrow liras and sell dollars to prevent lira's depreciation. “The market is attentive to central bank actions, and so far these are working to calm markets down,'' said Caio Natividade, an emerging markets strategist at Deutsche Bank AG in London. The forint rose 0.3% today to 279.36 per euro at the close in Budapest, recovering from last week's record low. Turkey's lira has gained about 4% against the euro since the central bank's meeting on June 25. Poland's currency advanced as the government raised its estimate for growth this year, helping generate confidence in its economy. The zloty is up 0.8% against the euro from the 11-month low of 4.1335 reached June 23. It traded at 4.07 at 5:45 p.m. in Warsaw. Poland's government raised its forecast for growth on June 22 to almost 5% from 4.6%, PAP newswire reported, citing Deputy Finance Minister Stanislaw Kluza. The government acted after a report showed industrial output rose more than forecast by economists. “The Polish fundamentals are good,'' said Giancarlo Perasso, head of emerging markets research at WestLB AG in London. “The Polish zloty is stronger now as there was no reason for it to be as weak as it was in previous days.''

Turkish Auctions: Emerging-market stocks, bonds, and currencies slid since the start of last month on concern U.S., European and Japanese policy makers will boost global borrowing costs, reducing demand for riskier assets. Emerging-market stocks broke the longest string of gains since 1989 this quarter. Turkey's lira has lost almost one fourth of its value against the dollar since the beginning of May, as yields on benchmark two-year bonds soared more 6% age points to about 22%. “Emerging market foreign exchange is having a better tone'' this week, JPMorgan Chase & Co. currency strategists, including Frida Gjorstrup in London, wrote in a report to clients today, citing the Turkish central bank's actions. The Turkish central bank stepped up efforts to defend the lira, buying and borrowing more of the currency. The bank borrowed 694 million liras from markets for as long as two weeks today, one day after saying it wouldn't borrow more than 500 million liras. The bank also sold $500 million at an auction for a second day, bringing its total dollar sales to about $2 billion in two days. (Bg)