Forint Extends Weekly Decline on Economy, Central Bank ConcernAndras Gergely
The forint weakened for a second day, extending this week’s decline amid concern Hungary’s recession is deepening and increasing uncertainty over the succession at the helm of the central bank.
Hungary’s currency yesterday fell 0.6 percent against the euro in the biggest depreciation among major currencies after reports showed gross domestic product fell 2.7 percent in the fourth quarter from a year earlier, the most in three years. Prime Minister Viktor Orban said today he won’t make changes to his Cabinet, casting doubt over Economy Minister Gyorgy Matolcsy’s chances of becoming the next central bank president.
“Yesterday’s bad data is still having an impact today,” Karoly Bamli and Imre Kerekgyarto, Budapest-based currency traders at Commerzbank AG, wrote by e-mail today. “The question of the central bank succession also remains in focus.”
The forint depreciated 0.1 percent to 292.09 per euro by 5:02 p.m. in Budapest, extending the week’s decline to 0.4 percent. The yield on 10-year government bonds fell three basis points, or 0.03 percentage point, to 6.36 percent.
Matolcsy, who led the government’s self-described unorthodox policies such as pension fund nationalizations and industry tax increases, is the front-runner to succeed Simor, whose term ends in March, Nomura Holdings Plc and Standard Bank Group Ltd. said in reports on Feb. 12 after meeting with officials in Budapest.
Mihaly Varga, the minister in charge of negotiations with the International Monetary Fund, yesterday told Inforadio that he won’t become central bank president. Varga would accept another Cabinet post if his job is eliminated as IMF aid talks end, he said.
Varga’s comments boosted chances for Matolcsy’s nomination as central bank president in March, Carolin Hecht, a Frankfurt-based strategist at Commerzbank, wrote in a research report today, calling Matolcsy the “forint-horror candidate.”
“The prime minister is trying to wait until the very end” before announcing his pick, which “is keeping the markets in uncertainty,” Balint Torok, a Budapest-based analyst at Buda-Cash Brokerhaz Zrt, said in a note today.
The forint tumbled as much as 3 percent after Matolcsy said in December that the bank should “bravely” use unorthodox methods to bolster the economy. Hungary’s currency rebounded after Matolcsy and the central bank’s rate-setting Monetary Council each urged caution on using “unconventional” monetary tools.
The forint rallied in the five days through Feb. 13 as the government raised $3.25 billion in its first sale of foreign bonds in 21 months, after getting $12 billion in bids.