Hungarian forint jumps after Orban’s election defeat

SINGAPORE: The Hungarian forint sharply extended recent gains on Monday, making an almost three-year peak on the euro, as investors bet on a boost for the economy from the stunning defeat of veteran nationalist Viktor Orban at the ballot box.

The forint rose roughly 2% to 367.81 per euro in thin Asian trade and gained about 1.6% to 315 per dollar - within a whisker of a four-year high.

Hungarian dollar bonds, also trading thinly outside their usual hours, steadied after a recent rally.

In an election cast by Orban’s centre-right opponent as a choice between east and west, voters turned out in record numbers to end Orban’s 16-year rule and hand power to his one-time ally Peter Magyar, who leads the Tisza party.

Investors had been bidding up Hungary’s stocks, bonds and currency in days leading up to the election, figuring a pro-Europe turn could start to unlock some 18 billion euros ($21 billion) of frozen European Union funding.

The outcome of the vote will also affect other countries such as Ukraine - where Orban is currently blocking a 90 billion euro EU loan. Ukrainian dollar bonds did not trade early in the Asia session. “Orban, has conceded defeat, implying a smooth transition of power,” Goldman Sachs analysts said in a note on Sunday.

“Tisza has committed to meeting the Maastricht criteria by 2030 to prepare for eventual Euro area accession,” they said, referring to the euro’s founding Maastricht Treaty.

“If it is serious about meeting this goal, one of the first steps in a euro convergence programme would be to lower Hungary’s inflation target from 3% currently to the Euro area’s 2%, a development that would imply a significant decline in Hungary’s long-term yields.”