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Hungary’s Forint Seen Falling to Record Amid Euro-Region Turmoil

Hungary’s forint may weaken to an all-time low per euro as the currency area’s struggling economy generates “growing market nervousness,” according to X-Trade Brokers Dom Maklerski SA, the currency’s third-most accurate forecaster.

The forint may extend the developing world’s second-biggest one-month decline in the coming weeks as concern over slowing euro-area growth dents the currencies of nations with close economic ties to the region, the Warsaw-based brokerage said.

The probability the forint will drop to a record against the euro by the end of March has increased almost six-fold to 77 percent in the past month, according to data compiled by Bloomberg based on market options. The chance of gains to below 310 per euro fell to 43 percent from 74 percent in the period.

“We see risks that global markets will turn to full-scale turmoil,” Przemyslaw Kwiecien, the Warsaw-based chief economist at X-Trade Brokers, said by phone today. The major concern is a long period of accommodative monetary policies might not be enough to spur global growth, he said.

‘More Elevated’

Sluggish growth in the euro area and the first negative inflation rate in more than five years pose risks to Hungary’s economy, which conducts 75 percent of its trade with the European Union. In a bid to support growth, the National Bank of Hungary has pledged to keep its benchmark rate unchanged at a record- low 2.1 percent until the end of the year after ending a 24-month rate-cut cycle in July.

The forint rose 0.1 percent to 319.36 per euro by 4:08 p.m. in Budapest after retreating as much as 0.4 percent to 320.86, the weakest in three years. The currency fell to a record 324.24 in Jan. 2012, when Hungary requested aid from the International Monetary Fund and the nation lost its investment-grade credit rating.

XTB’s Kwiecen said he will probably change his forecasts next week to reflect “more elevated” exchange rates for the first half of the year. On Dec. 11, he predicted a 311 forint-per-euro rate for the end of March, according to data compiled by Bloomberg.

Hungary’s government signaled it won’t intervene to prop up the currency, with state secretary at the Economy Ministry Andras Tallai saying the cabinet “is interested in a forint exchange rate that supports sustainable growth.”

‘Unfavorable Sentiment’

The decline in Hungarian assets, including the forint, is caused by “unfavorable global sentiment” stemming from the Russia-Ukraine conflict, the plunge in oil prices, looming Greek elections and the mixed economic performance of developed nations, the central bank said in an e-mailed response to questions yesterday.

“The currency has eroded earlier resistances,” Monika Kiss and Akos Kuti, economists at Equilor Befektetesi Zrt. in Budapest, wrote in an e-mailed report today. It’s showing a higher correlation with Russia’s credit default swaps due to increased regional risks, they said.

To contact the reporter on this story: Marton Eder in Budapest at [email protected]

To contact the editors responsible for this story: Wojciech Moskwa at [email protected] Chris Kirkham, Matthew Brown

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