Forint closes the week badly, further weakening expected

Thursday brought significant changes in the EUR-USD exchange rate because of the better-than-expected American inflation data and the softer communication of the European Central Bank. The USD strengthened, and that had a significant negative effect on the forint. But where is the end of that slope?

According to portfolio.hu, other factors affected the exchange rate of the forint. One of them was the Japanese national bank’s unexpected policy change ruining the global investment mood. That is why the forint broke even the 385 HUF/EUR and the 350 HUF/USD exchange rate. Currently, those rates are 384.4 and 349.oo

Forint concludes a week of constant weakening

This week marked a 1.8 pc fall against the euro and 2.9 pc against the USD. Meanwhile, its regional competitors performed much better and forint lost 2.9 pc of their value against the Polish zloty and 2.6 pc against the Czech koruna. That means an 8-month-long low against the Polish currency. In the first phase of the week, the reasons were internal. The Hungarian national bank decided to maintain the base interest rate but narrowed the interest corridor further. The upper band lowered by 100 basis points to 17.5 pc. In the second part, the aforementioned external factors contributed to the forint’s plummet.

Markets now wait for the Polish CPI data next Monday and the Czech central bank’s interest rate decision next weekend. Those may further decrease the value of the forint. Interestingly, the Czech national bank’s base interest rate at 7 pc. Meanwhile, that rate is 13 pc in Hungary, the highest in the EU. The national bank will not decrease it in the short run because that is the only barrier between the forint’s drastic weakening and today’s exchange rate.

Read HERE about the Hungarian finance minister’s thoughts about introducing the euro. In THIS article we tried to sum up the reaons behind the forint’s weakening.