Hungary forint strengthens on IMF deal hopes

The Hungarian forint recovered on Friday morning from record lows on speculation that Prime Minister Viktor Orban's government might submit to demands from international lenders to secure a bailout. The forint, which ended Thursday at 319.71 against the euro having hit a new historic low of 324 forints earlier in the day, strengthened to 315.85 by 0856 GMT on Friday. International Monetary Fund and European Union officials broke off negotiations last month about a possible credit line of 15-20 billion euros ($20-25 billion) because of worries about reforms of Hungary's central bank. But traders said that talks Friday between Orban, Tamas Fellegi, the minister heading talks with the IMF, and the central bank governor Andras Simor raised hopes that Budapest may be prepared to compromise. "The participation of Simor at the discussion shows markets that the tension between the central bank and the government had eased," Erste Bank analyst Zoltan Arokszallasi told AFP. The results of the talks will be revealed at a press conference according to Hungary's national news agency MTI. Contacted by AFP, a spokesman for the prime minister's office said he had "no information" about any such news conference. Fellegi, who is due to hold talks with IMF officials in Washington on January 11, said on Thursday that he wanted to secure a deal "as soon as possible" and that the government was aware of the gravity of the situation." The reforms of the central bank, which the EU, the IMF and the European Central Bank fear will undermine its independence, is part of a raft of laws that came into effect under a controversial new constitution on January 1. The constitution also removes vital checks and balances on the power of Orban's government, increases its influence on the judiciary and skews the voting system in his favour, critics at home and abroad say. On Monday, tens of thousands of demonstrators took to the streets of Budapest.