Hungary’s currency just fell by the most in nearly two months, as concerns over its ability to finance its budget get worse.
The forint slid as much as 1.4 per cent, the most in seven weeks, and traded 1.2 per cent weaker at 280.436 per euro as of 11:40 a.m. in Budapest. OTP Bank Nyrt. and oil refiner Mol Nyrt. led the BUX gauge of 12 stocks down 3.2 per cent to 20,679.11, poised for the lowest close in five months.
Hungary, the first European Union nation to receive an International Monetary Fund bailout during the credit crisis two years ago, plans to shift 3 trillion forint ($14 billion) of assets from private pension funds into the state budget to help cut its deficit and public debt.
Bonds and stocks also fell as the nation remains in state of near-crisis. However, Hungary is no Greece or Ireland for at least one very important reason. It has its own currency, one which has been able to fluctuate freely as needed and has declined sharply vs. the euro (below) and the dollar (not shown) since March 2009.
Thus Hungary can depreciate its way to export competitiveness and debt relief if necessary, and when the currency drops sharply on days such as today you know half the Eurozone has to be extremely jealous. The pain for Hungary could be severe in the near-term, but at least they know that they have a currency that can adjust to their own economic needs, rather than to Germany and France’s.