Forint continues dropping; Orbán, base rate cuts blamed

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The forint continued its slide against the world’s currencies on Thursday and into Friday, with most analysts citing the ongoing “easing cycle” and reduction to the National Bank of Hungary (MNB) base rate as causes.

According to national news service MTI, the forint weakened to above 300 to the euro for the first time since mid-September by Friday afternoon, trading at 300.94 to the euro at 4:15 p.m., compared to the 299.93 rate recorded 22 hours earlier; this marked a slight improvement from early afternoon, when the rate topped out at 301.48. 

Reuters reported Friday’s drop and the currency’s current value in November suffered its largest monthly drop since March, a total depreciation of 2% month-on-month. The news service quoted Equilor Brokerage currency trader Pál Saaghy as explaining that the cuts to the MNB base rate “are the main source of pressure on the forint. The easing may reach the point where Hungarian government debt won’t provide enough of a risk premium for investors.”

MSzP MP: Orbán government has “generated a financial crisis”
Meanwhile, deputy parliamentary leader István Józsa of opposition party MSzP levied much blame on Prime Minister Viktor Orbán and his government for the forint’s drop in value, while spreading some blame to National Bank of Hungary (MNB) governor György Matolcsy as well.

In an official statement to MTI, Józsa emphatically stated that “[Orbán and] his unorthodox team have once again put pressure on the forint rate”, adding that the forint’s recent fall was due to Matolcsy’s call on Thursday that European Commissioner for Economic and Monetary Affairs Olli Rehn resign for “the European Union’s faulty economic policy.”

Józsa naturally pushed his party’s contrary line, stating that a strong forint and Eurozone affiliation would be advantageous but “Orbán has made it clear that he does not want a strong forint or the euro in Hungary.”

Rehn going nowhere
And for those wondering about the efficacy of Matolcsy’s verbal salvo launched at Rehn, rest assured that little will change.

Spokesperson Pia Ahrenkilde Hansen informed MTI on Friday that “Central banks carry out their work independently, and this is also true of the European Commission and [Rehn], who will continue to fulfill their tasks independently. Olli Rehn has no intention of resigning.”

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