This is why the Hungarian forint is the most vulnerable in the region

The Hungarian Forint performed poorly this year when compared to regional currencies Polish Zloty (PLN), Czech Koruna (CZK) and Romanian Leu (RON). This is due to multiple economic and political reasons and a distrust of the Hungarian currency. The Hungarian press claims that without EU funding and a balanced budget agreement, Forint’s future remains bleak.

historical low

This week has not been the strongest for the Hungarian Forint. The euro, US dollar and Swiss franc (CHF) hit all-time lows. The exchange rate for the euro is above 423 forints, but for the US dollar this total is 434 forints. Compared to his January this year, the forint has fallen 14.6% against the euro and 33% against the US dollar. Világgazdaság he said.

On the other hand, regional competitors PLN, CZK and even RON performed much better. Their exchange rate stagnated against the euro. For example, the Polish zloty fell only 6% against the euro. In addition, their value against the dollar has decreased by 15-23 percent.

read alsoHungarian forint, one of the worst performing currencies in the world

vulnerable forint

The press mentions Dávid Németh, a principal analyst at K&H Bank, in the article. He says there are no new factors behind Forint’s weakening. The new historical low was the result of growing mistrust of HUF.

Nemes argues that Hungary really needs an agreement with the European Commission on EU funds to stabilize the forint’s exchange rate. Moreover, higher energy prices will also weaken the forint as it will destroy the trade and current account balances. In other words, you have to pay more for the same amount of energy. Furthermore, the economic outlook is uncertain. That’s because a recession is likely in the next period, Nemeth added.

The Hungarian Forint’s performance has deteriorated relative to local currencies due to Hungary’s perception of risk due to high import rates, energy dependence and declining credit ratings. Moreover, Hungary’s foreign exchange reserves are also lower than those of Romania and Poland. Investors are therefore cautious.

Hungarian Forint exchange rate
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Agreement with EU required

A leak in the Baltic pipeline didn’t help Forint either. Risky currencies will suffer the most if international risk aversion increases, Nemes said. In the Central European region it is now the Forint.

The Hungarian National Bank (MNB)’s decision to raise the base interest rate this week did not help. The market had expected MNBs to end this year’s base rate hike cycle after the deal on EU funds.

Overall, in the short term, the key is consensus. Meanwhile, in the long term, Hungary will have to restore its balance indicators.

budapest hungarian town
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sauce: Villa Gazda Sag This is why the Hungarian forint is the most vulnerable in the region

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