Hungary raises interest rate to EU record high to shield forint

Struggling Hungary has moved to raise its benchmark interest rate from 6% to 6.5%, the highest ever level seen in the European Union, in order to protect its currency.

Last week, Hungary's credit rating was downgraded by Moody's by one notch to Ba1. Shortly afterwards yields on the country's government bonds rose to their highest since February, at 9.87% on five year bonds, while the forint fell to its weakest ever level against the euro at 317.92 in mid-November. The forint is the world's worst performing currency against the euro in the second half of this year, according to Bloomberg data. Bond investors have long been cautious on Hungary, which was badly damaged post-Lehman, and has been subject to a series of high risk and unorthodox policy ...