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UPDATE 2-Hungary "not far" from agreement with IMF - PM Orban

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* Further progress expected after IMF meetings in Tokyo

* Forint climbs, CDS, bond yields lower as markets expectdeal

* Still no date for next round of talks - Hungary'snegotiator with IMF

(Adds minister's remarks, market reaction)

By Gergely Szakacs

BUDAPEST, Oct 12 (Reuters) - Hungary is "not far" from afinancial backstop agreement with the IMF, Prime Minister ViktorOrban said on Friday, sending the volatile forint to a one-monthhigh against the euro.

Orban's representative in the negotiations, however,dampened hopes for an imminent breakthrough in the stop-starttalks on a multi-billion euro loan that Budapest first requestedalmost a year ago.

Central Europe's most indebted nation, which has not tappedinternational debt markets this year, needs a financing deal tocurb its high borrowing costs and rebuild market confidence hurtby years of unorthodox economic policies.

"There is a good chance. We are not far from a goodagreement," Orban told radio station MR1-Kossuth in an interviewwhen asked about the prospects of striking a deal.

Orban said further progress in the talks could be made afterthe International Monetary Fund concludes its annual meetingbeing held in Tokyo.

The forint scaled a one-month high in early tradeon Friday, while the country's 5- and 10-year government bondyields came down to two-year lows.

But Orban's minister in charge of the talks, Mihaly Varga,told Hungarian news agency MTI at the IMF meeting that no datehad been set yet for the next round of talks, after Budapestunveiled its latest concessions for a loan last week.

Orban said pressure on Hungary to secure a deal at all costshad abated and confidence in the country had strengthened.

Some market participants believe Hungary is playing for timein the talks.

Varga was quoted by MTI as saying Hungary needed a safetynet due to its weak growth outlook, projected by the IMF at just0.8 percent in 2013 after a recession this year, one of theweakest performances in central Europe.

He also said that if there was no fundamental change inglobal sentiment until the middle or end of next year, Hungarywould need no external funding. He did not elaborate, butreiterated that any eurobond issue could only follow an IMFagreement.

Earlier this week Orban said whether Hungary would secure anagreement with the IMF and the European Union on a loan tobolster its shrinking economy would be determined by the firstquarter of next year.

After preliminary talks in July, Hungary moved a step closerto a deal last week by abandoning a planned tax on its centralbank and flagging new budget cuts worth 397 billion forints($1.83 billion) next year to keep its deficit under control.

Market optimism that a deal may be near curbed yields on thegovernment's "junk-rated" bonds below 7 percent, while the costof insuring Hungary's debt against default fell to levels lastseen in July 2011.

Fitch Ratings told Hungary on Wednesday that it should nottry to go without IMF support.($1 = 217.49 Hungarian forints)

(Reporting by Gergely Szakacs; Editing by Andrew Heavens andHugh Lawson)

((gergely.szakacs@thomsonreuters.com)(+36 1 327 4748)(ReutersMessaging: gergely.szakacs.thomsonreuters.com@reuters.net))

Keywords: HUNGARY IMF/