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Forint may advance after govt. agrees tax concession

The forint may gain on speculation overseas investors won't be deterred from investing in Hungary after the government said it would allow businesses to deduct research and development expenses when calculating a new tax.

The government made the decision yesterday following complaints from the country's largest exporter, Volkswagen AG's Audi unit. Hungary's currency reached a five-month high versus the euro last week. “Audi said they will not stop investing in Hungary, it's certainly positive,” for the forint, said Martin Blum, head of emerging-market strategy at Bank Austria Creditanstalt AG in Vienna. “We may see the central Europe currencies trading on the stronger side.” Against the euro, the forint traded at 261.28 at 10:37 a.m. in Budapest, compared with 261.32 late yesterday. The forint may be also supported by signs the trade deficit is narrowing. The trade shortfall narrowed to €116 million in September from €258 million the previous month, a government report showed today. (Bloomberg)