Hungary currency slumps over central bank leadership

Hungary's currency, the forint, slumped Friday on the back of market concerns over an imminent change at the helm of the country's central bank.

The forint fell by around 1.2 percent to 297.28 forints to the euro at 1353 GMT. Compared to early Thursday, when it stood at 289.50 forints to the euro, the drop was close to 2.7 percent.

Analysts attributed the slide in the value of the forint to the prospect of Economy Minister Gyorgy Matolcsy taking control of the central bank.

A close ally of Prime Minister Viktor Orban, Matolcsy is a leading candidate to take over from incumbent Andras Simor, who has often clashed with Orban on economic policy and whose term expires in March.

Concerns were heightened by comments Matolcsy made in the Heti Valasz newspaper Thursday, arguing "it was a mistake to fight inflation by maintaining a strong forint."

"Analysts believe Matolcsy's nomination would shock the markets," Portfolio.hu, a leading Hungarian business online portal, said Friday.

"The markets expect the central bank will allow the forint to weaken from March."

In a recent radio interview, Matolcsy, known for his unorthodox economic ideas such as the nationalisation of private pension funds and windfall taxes on banks, retailers, and energy companies, said that the bank had "at least 12-16 methods" to stimulate growth.

Business daily Vilaggazdasag also quoted Matolcsy's ministry Wednesday as saying that leading central banks had used unconventional monetary policy methods ever since the start of the crisis, including granting liquidity to banks in order to save them from bankruptcy.

Simor is to step down on March 3, with his successor due to be named next month.

Matolcsy has already said he will want close cooperation between the bank and the government.

"A strategic partnership between the central bank and the government would send a signal that the bank will try to increase growth with new tools, and that has not yet been factored in to the forint exchange rate," said Eszter Gargyan, an analyst with Citibank, told Portfolio.

The latest figures indicate recession-hit Hungary will see gross domestic product contract by 1.63 percent in 2012 with modest growth only forecast for 2013.

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Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.2520-0.0008-0.06%
    USDSGD=X
    1.7299-0.0007-0.04%
    EURSGD=X
    2.1024-0.0017-0.08%
    GBPSGD=X
    81.7743+0.0416+0.05%
    SGDJPY=X
    6.1934+0.004+0.06%
    SGDHKD=X
    2.5862+0.0016+0.06%
    SGDMYR=X
    9,121.0420-30.1768-0.33%
    SGDIDR=X
    4.9722+0.0081+0.16%
    SGDCNY=X
    1.1689+0.0004+0.03%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,294.60-8.90-0.68%
    GCM14.CMX
    19.67+0.01+0.05%
    SIN14.CMX
    90.18-0.65-0.72%
    ^XAU
    3.04+0.02+0.51%
    HGK14.CMX
    104.59+0.83+0.80%
    CLK14.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.73+0.08
    ^FVX
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    ^TNX
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    ^TYX

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.115-0.002-1.71%
    B22.SI
    0.48+0.020+4.35%
    5GJ.SI
    2.27+0.090+4.13%
    5ME.SI
    2.190.0000.00%
    JS8.SI
    0.61+0.005+0.83%
    E5H.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.162+0.034+26.56%
    5GF.SI
    0.20+0.034+20.48%
    5WD.SI
    0.59+0.050+9.26%
    L5I.SI
    0.28+0.020+7.69%
    C33.SI
    0.215+0.015+7.50%
    5UE.SI
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    % Losers
    NamePriceChange% Chg
    0.103-0.010-8.85%
    5OS.SI
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    5RC.SI
    0.355-0.025-6.58%
    KJ9.SI
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    F9M.SI
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    5PC.SI