The Hungarian forint gained as investors expected the central bank to increase the main interest rate, already the highest in the European Union.
The currency may log a fourth consecutive week of gains after a government report earlier this week showed that wages soared in August, contributing to inflationary pressures. Rate setters may lift borrowing costs to as much as 8.25% at next week's monetary policy meeting, a Bloomberg survey shows. The forint gained on expectations that the policy meeting would show a “hawkish central bank, due to local inflation developments,” said Barbara Nestor, an emerging-markets strategist at Commerzbank AG in London. “Very positive conditions for emerging-markets currencies” also support the forint, she said. Against the euro, the forint gained 0.5%, the biggest advance in a week, and traded at 264.33 at 11:15 a.m. in Budapest. It may advance to 264.00 per euro if the bank decides to tighten monetary conditions next week, Nestor said.
Hungary's average wages rose 10.7%, the most in 18 months, in the year to August compared with 8.6% the previous month, a report on October 17 showed. The monetary policy council will this month lift the main interest rate by 25 basis points to 8%, said nine out of 17 economists surveyed by Bloomberg between October 9 and October 18. Six expected an increase of half a percentage point and two said there will be no change in borrowing costs. The U.S. Federal Reserve has kept its target overnight lending rate between banks at 5.25% since June. Euro region borrowing costs now stand at 3.25%. (Bloomberg)