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Hungarian Forint heads for record on rate boost

Hungary's currency climbed to its highest since mid-June today as investors were drawn to the premium on the country's fixed-income assets compared with benchmark German debt. Hungary's benchmark rate is the highest in the European Union. “We saw a lot of foreign investors and investment banks buying after the rate increase,” said Gábor Korompai, a currency trader at BNP Dresdner Securities in Budapest. Against the euro, the forint traded at 270.82 at 10:33 a.m. in Budapest, from 271.04 late yesterday, up 2.2% since the end of last week. It was at 213.24 per dollar. The currency may advance to 269 per euro today, Korompai said. The forint has advanced every day since the central bank lifted its two-week deposit rate to 6.75% from 6.25%, the biggest increase in 2 1/2 years. Only five among the 17 economists surveyed by Bloomberg had forecast the move. Hungarian five-year government bonds yield 4.02 percentage points more than German debt with a similar maturity, up from 3.15 percentage points two months ago. The spread has averaged 3.59 percentage points since the start of the year. The shortfall is three times the limit for the countries aiming for the euro adoption. Yesterday, Hungary's government said it no longer targets 2010 as its goal for adopting the euro.
Market for the government bonds is also at a standstill, next week there would be Ft 45 billion of 2011/B five years bond and Ft 40 bilion of the ten years bond for sale by the Government Debt Management Agency Ltd. (ÁKK Rt). On Thursday these had made a 7,44% and 7,28% benchmark. (Bloomberg, FigyelőNet)