Currency traders are seldom known for their forgiving natures. But in the case of Hungary they appear to be making an exception.

Hungary was considered something of a market pariah at the end of last year. A lurch towards authoritarianism under Prime Minister Viktor Orban alienated investors, who were already worried by the nation’s onerous debt burden. Yet the Hungarian forint has been among the strongest emerging market currencies so far this year, climbing roughly 10 percent against both the dollar and euro.

Investors may have been too quick to forget the reasons they shunned Hungary in 2011.

For a start, the nation’s finances look as precarious as ever. Its government debt — at about 80 percent of national income — is the highest in Eastern Europe. Hungary’s dependence on foreign creditors makes such high levels of debt even more of a problem. Foreigners hold about 40 percent of government bonds, leaving Hungary vulnerable to rapid capital flight.....

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