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Forint set for weekly gain as cabinet cuts deficit

The Hungarian forint headed for a third week of gains, benefiting from investors' optimism about the government's fiscal reform program and a reduction of its Q1 budget deficit forecast.

Hungary's government, working to lower its budget gap after running up the European Union's widest shortfall last year, said yesterday it expected the deficit to reach Ft 852.7 billion in the first three months of this year, Ft 42 billion less than planned. „Warm sentiment towards the forint continues as the cabinet sticks to its public finance reforms plan,” said Iwona Pugacewicz-Kowalska, regional economist for central European countries at Citigroup Inc. in Warsaw. „The revision of budget forecasts was good news, investors like the government's cautious approach and after last year's falls the forint is still strengthening.” Against the euro, the forint advanced to 252.60 at 2:36 p.m. in Budapest, from 253.36 on February 9, taking its gain in the week to 0.3%. Pugacewicz-Kowalska said the currency may reach 245 against the euro by year-end. Demand for forint assets remains „strong,” as signaled by a continued growth in the stock of Hungarian government bonds held by foreign investors and the forint's gains versus the euro, according to minutes from the latest central bank meeting of policy makers published today on the bank's Web site. Global risk appetite has stabilized at a high level, it added. The yield on the Hungarian 6% benchmark bond due October 2011 fell 7 basis points to 7.43%. (Bloomberg)