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Hungarian forint may gain on views bank to keep raising rates

The Hungarian forint may advance for a fifth day in six on speculation the central bank will continue raising interest rates, already the highest in the European Union, after yesterday lifting them to 8%.

The Budapest-based central bank increased Hungary's benchmark rate for a five consecutive month on concern about rising consumer prices. The rate of inflation rose to 5.9% in September, the highest in two years, after the government raised a value-added tax rate and cut energy subsidies, boosting prices of electricity and natural gas. “The forint will go up and one of the reasons is that there's room for another rate increase this year,” said Carlin Doyle, an emerging-market strategist at State Street Global Markets. “The central bank is ready to combat inflation.” Against the euro, the forint has risen 4% this month, making it the best performer of 71 currencies tracked by Bloomberg. It traded at 262.39 per euro at 10:42 a.m. in Budapest, from 262.57 late yesterday. Hungary's currency may gain to 240 per euro in six months, buoyed by the austerity measures implemented by the government to cut the nation's excessive budget deficit, Doyle said. “The strengthening of inflationary pressure continued, based on the freshest consumer price index data,” central bank President Zsigmond Járai said yesterday. “There is still a substantial risk that the inflation expectations of economic players will permanently increase.”

In other trading, the Slovak koruna extended yesterday' gains, climbing to 36.53 per euro in Bratislava from 36.58. The Polish zloty was little changed at 3.88 per euro in Warsaw. Poland's central bank will probably will keep its benchmark interest rate at a record-low 4 percent for an eighth consecutive month as a employers' reluctance to boost wages is keeping inflation in check, a survey of economists shows. The rate-setting Monetary Policy Council will keep the seven-day benchmark rate unchanged since March, according to all 14 economists surveyed October 9-24 by Bloomberg. A decision will be announced after noon in Warsaw. (Bloomberg)