Forint rises after Hungary cuts rates The Hungarian forint rose after the country's central bank cut interest rates to a record low of 5 per cent, as it juggled attempts to boost growth with the need to keep the currency supported to help homeowners with hefty debts in overseas currencies. The US dollar fell nearly 1 per cent to Ft236 while the euro fell 0.8 per cent to Ft303 as traders said some investors had been expecting György Matolcsy, the new governor of the central bank, to take a more aggressive stance on monetary easing. The fallout from Cyprus helped to drive Hungary's currency to its weakest level against the dollar since July on Monday, as foreign currency traders said hedge funds had been selling the Hungarian currency as a bet against the eurozone. Analysts said the forint remained particularly vulnerable to a fresh crisis in Europe. "Hungary is on the front line of potential contagion risks due to its weak economic fundamentals," said Benoit Anne, emerging market strategist at Société Générale. It's a market where positioning can be a risk as the fast money can decide to exit. It's not like Poland where you're seeing sovereign wealth funds because of the strength of its fundamentals. Hungary is more of a toxic gambling play. Hungary has cut interest rates every month since August in an effort to boost its sluggish economic growth. The eastern European country's economy shrank 1.7 per cent last year and is forecast by the government to grow just 0.5 per cent this year. Traders said the rate cut was unlikely to reduce demand for Hungarian debt from longer-term investors, where bond yields remain well above those in larger developed nations. The percentage of Hungarian government debt held by foreign investors has more than doubled since 2010 to 47 per cent this year. "Speculators have been attacking the forint in recent months," said Rob Hoodless, currency trader at Citigroup in London. [But] the long-term investors are really sticky. Standard & Poor's, the rating agency, revised its outlook for Hungary's government debt from stable to negative last week. The country currently has a BB rating. Hungary attracted international criticism earlier this year after Viktor Orbán, prime minister, announced plans to replace the head of the central bank with Mr Matolcsy, his former economy minister. Jens Weidmann, president of Germany's Bundesbank, singled out Hungary in a speech in January, warning that the erosion of central bank independence in certain countries was an "alarming infringement." Hungary's central bank faces a difficult balancing act between stimulating growth and stabilising its currency, as falls in the forint hurt borrowers who took out foreign currency mortgages before the financial crisis. Hungary's government is said to be looking at plans to use the country's foreign exchange reserves to help those borrowers, according to reports in local media.