The forint had its biggest decline against the euro in almost a month on concern the extra yield investors earn on the Hungarian currency doesn't justify a five- week rally to its strongest since May.
The Hungarian forint is the third-worst performer versus the euro today, sliding along with other currencies that benefit from high yields such as the Turkish lira and Mexican peso. The lira is the world's worst performing currency today. The forint has advanced 5% against the euro in the past five weeks as investors bought Hungarian assets with funds borrowed abroad. “The forint is falling, retracting some of the recent gains,” said Luis Costa, emerging markets strategist at ING Bank NV in London. “It's a movement that we see in the case of most of the high-yielding currencies.” The currency traded at 262.16 to the euro at 11:56 a.m. in Budapest, from 260.60 late on October 27, when it touched 260.08, the strongest in five months. Today's slide was the biggest since October 2. The forint was at 206.14 per dollar, from 204.68.
Investors sold higher-yielding currencies before the release of the Federal Reserve's preferred inflation gauge today, which will offer clues on the outlook for US interest rates, said Jon Harrison, an emerging-markets strategist at Dresdner Kleinwort in London. Speculation the Fed would keep rates on hold has spurred investors to seek higher yields than those on dollar assets. “There is a risk that the data doesn't support the improved sentiment that we saw over the last few weeks,” said Harrison. “People prefer to lock in some profits.” The core price index, tied to spending and excluding food and fuel, is forecast to rise 0.2% for a second month, according to a survey of economists. The gain from the same month last year may slow to 2.4%, from 2.5% in August. The Commerce Department report is due at 8:30 a.m. in Washington. (Bloomberg)