The Hungarian forint advanced against the U.S. dollar in the European session on Tuesday, as Hungary's central bank lifted its benchmark rate at a sharper-than-expected pace.

The Monetary Council, led by Governor Gyorgy Matolcsy, hiked the base rate by 125 basis points to 13.00 percent from 11.25 percent.

The overnight deposit rate was increased by 125 basis points to 12.50 percent and both the overnight and one-week collateralised lending rates were raised by 125 basis points to 15.50 percent.

The Hungarian forint edged up to 419.72 against the greenback from Monday's close of 424.75. The Hungarian forint is seen finding resistance around the 404.00 level.

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