BUDAPEST: Emerging European currencies opened slightly firmer on Tuesday, with the Hungarian forint gaining most on hopes that the indebted country is inching closer to starting talks on precautionary financial aid.
The government in Budapest has signalled that the chief obstacle to starting the talks, a disputed central bank law, has been reviewed and a new version agreed with international lenders would be passed in parliament soon.
Hungary, the region's most indebted economy, needs the financing backstop from the International Monetary Fund and the European Union to reduce its high borrowing costs.
The latest developments have benefited the forint, which gained half a percent versus the euro by 0718 GMT, ahead of 0.2 percent gains in both the Polish zloty and the Czech crown. The Romanian leu was flat.
"Following the initial small steps, the Hungarian government now really seems to be about to start the negotiations about a precautionary credit line with its international backers," Commerzbank said in a note to clients.
"As the euro zone debt crisis remains unsolved, thus constituting a further potentially negative factor for the forint, it is in the government's interest to sort out an agreement with the IMF/EU as quickly as possible."
A dealer in Budapest added, however, that while optimism about a loan agreement could add some fuel to otherwise modest gains for the forint, this would not protect the currency from a big slide if the market turned pessimistic on Greece.
Dealers in Prague said uncertainty was keeping markets volatile, making trading difficult.
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