Forint Gains Second Day as Central Bank Warns on Policy Tools

The forint gained for a second day after policy makers yesterday cautioned on the use of new unconventional monetary policy measures as the central bank prepares for a change of leadership.

The currency appreciated 0.2 percent to 295.19 per euro by 10:18 a.m. in Budapest, extending the advance in the past two days to 1 percent. Yields on the government’s bonds maturing in 2016 dropped two basis points, or 0.02 percentage point, to 5.71 percent.

Hungary’s central bankers, who cut the main rate to 5.5 percent from 5.75 percent yesterday, said that expanding the bank’s policy toolkit is only useful in “acute” turmoil, according to a statement. The forint dropped 2.8 percent through Jan. 28 after Economy Minister Gyorgy Matolcsy said last month that the next governor, who takes over in March, should “bravely use unorthodox tools” to help the economy recover from its second recession in four years.

The Monetary Council’s comment on the rejection of additional unconventional methods may help the forint advance in the “coming days or weeks,” Zsolt Kondrat, a Budapest-based analyst at Bayerische Landesbank’s MKB unit, wrote in a research report today.

Matolcsy is the most likely successor to Andras Simor, whose term as central bank president expires in March, according to the Index and news websites.

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