Budapest - The Hungarian forint strengthened on Monday, the morning after the central bank's Monetary Policy Council issued a statement saying it will use all available means to halt the currency's seemingly inexorable decline.

The council stressed that it believes the fall in the value of the forint is the result of a lack of faith among investors and currency traders in the economic soundness of the Central European region as a whole, and not a true reflection of Hungary's economic fundamentals.

One specific line of attack mentioned in the statement was the conversion of large sums of EU subsidy into forints, in the hope that this will drive up the value of the Hungarian currency on money markets.

After hitting a record low of over 317 to the euro on Friday, the forint rallied to around 306 early on Monday, though it eased again slightly in later trading.

The governor of the Hungarian National Bank echoed the words of the statement, and did not rule out raising the base rate from its current 9.5 per cent if circumstances demand it.

"The monetary council is prepared to use all monetary policy instruments at its disposal to halt the depreciation of the forint," Andras Simor said.

The Hungarian National Bank held emergency meetings on Friday and Sunday amid fears that the fall in the value of the forint could make it difficult for Hungary to meet its foreign debt obligations.

Many ordinary Hungarians are also deeply worried by the weakening of the forint. A euro cost around 250 forints last summer; since early February, the exchange rate has been over 300. Against the Swiss franc, the forint's decline has been even greater. From around 145 last summer, a Swiss franc now costs around 215 forints.

In a country where most mortgages and personal loans are denominated in Swiss francs and, to a lesser extent, euros, many have seen their monthly repayments leap by around 50 per cent.

In addition to increasing the cost of paying off foreign currency debts, the weak forint also threatens to push up inflation as foreign goods become more costly. "If the weakening of the forint should become long term, import prices will directly ... jeopardize inflation targets," the central bank's statement read. (dpa)