Central Bank Succession Rumours Hit Hungarian Forint

Hungary's currency the forint fell Wednesday following a report that Economy Minister Gyorgy Matolcsy, seen as something of an economic maverick, is set to take over as governor of the central bank.

On Wednesday morning, the forint traded at 294.16 against the euro compared to 291.77 on Tuesday evening.

Analysts attributed the slide to a report late Tuesday in business daily Vilaggazdasag that the government had decided to appoint Matolcsy to replace Andras Simor, whose mandate expires on March 2.

Mate Kocsis, a government spokesman, told state news agency MTI that the report was "baseless".

Prime Minister Viktor Orban said earlier that a decision on Simor's replacement would be made close to March 2.

Matolcsy, a loyal ally of Orban, has been behind many of the government's more "unorthodox" policies such as nationalizing private pension funds and imposing "crisis taxes" on certain sectors.

Investors worry that this approach would be extended to monetary policy, and in particular by focusing too much on getting Hungary out of recession and not enough on battling inflation.

After Matolcsy hinted in January that unorthodox monetary policies were on the way, the forint dropped two percent in 24 hours.