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The Forint comes under pressure

January 17th, 2013

As the Forint weakens against the Euro, pundits wonder why international speculators are selling the Hungarian currency, and whether its slump is the result of the uncertainty related to the imminent choice of a new National Bank president, and of a possible quantitative easing program.

The Hungarian currency weakened to close to 300 Forints against the Euro last week. Economy Minister György Matolcsy has said that the slide is the result of a speculative attack triggered by the advice of Nouriel Roubini’s Global. In its response, Global Economics rejected the accusations and claimed that the Forint weakened because of rumours that in March Matolcsy will be nominated as the new head of the National Bank, and will launch an aggressive monetary easing program (see BudaPost January 14) . Earlier in January, Mr. Matolcsy wrote in Heti Válasz about a book which suggested that central banks need to actively help the economy through non-conventional monetary measures. In an interview Mr Matolcsy said that he considered the Forint too strong to help Hungarian exports.

Népszabadság, in a front page editorial, suggests that Roubini’s recommendation can hardly be blamed for the slump of the Hungarian currency. The well-known financial analyst circulated its newsletter on January 3rd, and the Forint plummeted only on Thursday. According to the left-wing daily, it is unlikely that speculators waited weeks before selling the Forint, if they were really under the influence of Roubini’s advice. Népszabadság believes that the Forint’s decline shows how suspicious markets are of Matolcsy. The daily also suggests that Matolcsy’s nomination as head of the National Bank could further deter investors from the country.

In Népszava, Tamás Bihari contends that Matolcsy’s explanation is a pure conspiracy theory. The left-wing columnist, however, speculates about what he considers a more feasible conspiracy theory. He wonders whether investors were informed before Matolcsy’s statements weakened the Hungarian currency. If so, they could have made a lot of money by betting against the Forint, Bihari remarks. The most likely explanation, however, is simply that the markets have realized that the Hungarian government is incompetent, he concludes.

In Magyar Nemzet, Anna Szabó finds Roubini’s claims shaky. The pro-government commentator believes that it is highly unlikely that Roubini recommends the shorting of the Forint on the basis of a few sentences cut from Matolcsy’s regular book review column and brief hints in an interview. Szabó speculates that markets want to compel the government to reach a deal with the IMF by attacking the Hungarian currency, despite the low public deficit and the popularity of government bonds.

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