By Ewa Krukowska
Dec. 6 (Bloomberg) -- Hungary’s forint fell last week for the first time since mid-November after industrial output dropped the most in 16 years, raising concern the economy is being hurt by a global slowdown.
The currency was the second-worst performer against the euro of 11 regional emerging-market currencies tracked by Bloomberg after the government said yesterday industrial production dropped 7.2 percent in October from a year earlier. Economists surveyed by Bloomberg had expected a decline of 5.6 percent.
“The forint is hit by the weak production and global worries,” said Ulrich Leuchtmann, head of foreign-exchange research in Frankfurt at Commerzbank AG. “There’s an increased risk of a global recession deeper and longer-lasting than any pessimistic views assumed.”
The forint slumped as much as 2.1 percent to 267.19 per euro, the biggest intraday decline since Nov. 7, and was at 265.64 by late yesterday in Budapest. It lost 2.5 percent in the week.
Output declined for a fifth month as the euro region, which buys 57 percent of Hungarian exports, entered a recession in the third quarter, crimping demand for products assembled in the country such as Audi cars and Nokia phones.
The German economy, Europe’s largest, will shrink the most in 16 years in 2009 as the global recession hits exports, the Bundesbank predicted yesterday.
U.S. Jobless
In the U.S., the Labor Department said yesterday employers eliminated jobs in November at the fastest pace in 34 years and the unemployment rate jumped as the yearlong recession engulfing the world’s largest economy deepened.
Hungary, which was forced to borrow from the International Monetary Fund to avert a default, will see its economy shrinking by 1 percent next year as a result of the global economic decline, according to government estimates.
Prime Minister Ferenc Gyurcsany told a forum in Budapest yesterday that the country’s benchmark interest rate should be lowered from the current 11 percent.
“A lot will now depend on how the central bank reacts,” Leuchtmann said. The “IMF demanded high interest rates and the risk is that if they cut rates the markets will fear there’s not enough adjustment. I wouldn’t be surprised if the forint fell further in such a situation.”
The European Central Bank yesterday cut its benchmark rate by 75 basis points on Dec. 4 and the Bank of England reduced its key rate by 1 percentage point.
The Czech koruna rose 0.1 percent to 25.842 per euro, paring a weekly loss to 1.8 percent. The Slovak koruna was little changed at 30.195 against Europe’s common currency, gaining 0.5 percent in the past week. The Polish zloty slipped 0.1 percent to 3.8883 per euro, declining 2.9 percent in the past five days. The Romanian leu lost 0.4 percent to 3.8563 per euro, for a weekly drop of 1.8 percent.
The Turkish lira dropped 2.7 percent to 1.6053 per dollar, depreciating 2.6 percent in the week.
To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net
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