Hungary’s forint weakened the most worldwide as Prime Minister Viktor Orban said his country had split with the European Union on Ukraine and the nation’s central bank prepares to cut interest rates.
(Bloomberg) — Hungary’s forint weakened the most worldwide as Prime Minister Viktor Orban said his country had split with the European Union on Ukraine and the nation’s central bank prepares to cut interest rates.
The forint dropped as much as 0.9% to 377.28 against the euro on Tuesday, the worst daily performance among emerging-market currencies.
Later on Tuesday, the Hungarian central bank is seen ordering this year’s first rate cut in the EU. Meanwhile, Orban — widely perceived to be the EU leader with the closest ties to the Kremlin — told Bloomberg that Ukraine can’t beat Russia “on the battlefield” and confirmed that his country has diverged from the bloc’s “mainstream” approach to aid for the war-torn nation.
Read More: Ukraine Can’t Win War Against Russia, Orban Says
“Lowering the overnight rate would leave the forint more sensitive to negative news, both related to domestic and external factors,” said Piotr Matys, a senior currency analyst at In Touch Capital Markets. “Hungary may have to wait longer until the European Commission unlocks EU funds after the country announced that it will block another tranche of financial support for Ukraine.”
The central bank is set to cut its key overnight interest rate by one percentage point to 17%, according to both analyst estimates and market expectations. The central bank has said it sees the probable move as the start of a series of reductions in official borrowing costs.
For much of 2023, Hungary’s 18% key rate has lured investors, helping lift the forint by 6% against the euro year-to-date, trailing only the Mexican, Columbian and Chilean pesos among developing peers.
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