The forint exchange rate hit a dramatic milestone this Tuesday, not witnessed since the beginning of October. It’s been affected, in part, by the crisis in the Middle East.
Világgazdaság.hu reported that the forint depreciated to a six-month low against the dollar at the beginning of the week, with one dollar fetching HUF 372.5. Additionally, the euro-forint exchange rate has also surpassed 390, approaching 395 on Tuesday.
The sterling performance of the dollar greatly impacts the forint exchange rate
Foreign exchange markets may be feeling the strain as the yield on the 10-year United States government bond rose to a record high this year, currently standing at 4.6 percent. The stellar performance of US bonds applies pressure to foreign exchange markets. Furthermore, for investors, the recent better-than-expected growth in the retail sector forecasts a sustained increase in interest rates in the United States.
In addition, the reduction in investor risk-taking due to the crisis in the Middle East also bolsters the dollar’s performance. Világgazdaság.hu suggests that if tensions were to ease in the Middle Eastern region, investor appetite for risks may increase, leading to a favourable turn for the forint exchange rate.
The Hungarian forint has some stormy months behind it
As we reported in multiple articles, the Hungarian forint experienced turbulent months at the onset of 2024. In February, it plummeted at a rapid pace, with the EUR/HUF exchange rate reaching 394, and the USD/HUF depreciating to 362, following interest rate cuts by the Hungarian Monetary Council.
It hasn’t helped the forint exchange rate that György Matolcsy, Governor of the Hungarian National Bank (MNB), sharply criticised the Hungarian government in March this year, alleging that Minister of Economic Development, Márton Nagy, was deliberately trying to undermine the central bank’s independence.
The dispute between the two institutions, largely rooted in the personal feud between Matolcsy and Nagy, hasn’t bolstered investor confidence in the forint. Consequently, economists cautioned that escalating tensions between the National Bank and the government could result in discord in effective policymaking, further weakening the forint exchange rate.
As we wrote in this piece, “analysts at the Egyensúly Institute [an independent Hungarian policy think tank – ed.] have forecasted that the Hungarian forint will likely remain above the 400/EUR threshold in 2025.”
Read also:
Horror at Hungarian petrol stations: price rise continues with petrol at 6-month high – HERE
Big change: 50,000-forint notes to be introduced? Central bank governor answers – Read HERE
Finance Minister – Mihaly Varga – comment please.
Look into that Crystal Ball or pick a card, or a “lucky” number = what’s HAPPENING ???
Got to make a right call on the Economy at some stage – Minister Varga.
Free assistance, to help with a comment or statement Finance Minister – Mihaly Varga, that is speaking Fact & Truth to all Hungarians.
” My Fellow citizens – we SURRENDER.
The Economic & Financial position, my fellow citizens is DOOMED.
Prepare yourselves, for it will WORSEN.”
Finance Minister – Mihaly Varga, could get some credit speaking to fellow citizens with Candour & Facts, that has NOT existed in the (8) eight years you have been Finance Minister, and a Senior Minister of the Orban Fidesz-Government, a “Founding Father” as you where of Fidesz along with the current Prime Minister – Victor Orban, that over (14) years asa Government, have dismally FAILED in being an HONEST Government.
US rate cuts are being pushed forward and will be shallower than previously anticipated due to strong economic growth and slightly sticky inflation though the producer price index which leads the CPI did come down in March. The ECB is not expected to cut rates until June. Meanwhile the Fidesz government desperately wants a rate cut to boost Hungarian growth which is anemic but the forint is under pressure. Matolcsy is holding off to keep the forint stable but it’s slipping anyways. It’s a no-win situation. If he doesn’t cut the economy doesn’t recover but if he cuts the forint tanks and the cost of imported goods rise giving you higher inflation. Looking at the chart what’s coming within weeks is Euro/Forint around 408 which is a level it traded at for a large part of 2022 which is around a 3% depreciation from 395 where we are now.
Please do not use hyperbolic terms for normal currency fluctuations and note that high returns in short term US treasury rates reflect an inverted yield curve, not a good sign for future growth.
Of course investors will buy more US bonds than HUF one, but the world tires of dollar hegemony and is planning a safer backed currency for world trade
Why should the world tire of “dollar hegemony”? The only ones tired of that would be autocratic regimes like Russia, China, Iran and North Korea. This “dollar hegemony” crap is being put out by Putinists who promote hatred of the US while forgetting the oppression that evil hole of a country did to the countries of Eastern Europe for decades and continues to do to its’ own people and people in many neighbouring countries.