U.S. presidential election pushes forint to 2-year low

The Hungarian forint has been facing intense pressure against the euro, recently sinking to a two-year low of nearly 410 EUR/HUF as the U.S. presidential election introduces a wave of uncertainty into global markets. This downturn is driven by a combination of events, including fluctuating poll results, which have led to the dollar strengthening and emerging-market currencies like the forint weakening.

Presidential election impact on the dollar and emerging markets

As Donald Trump’s election odds have improved in recent weeks, the dollar has gained strength—a trend that typically exerts downward pressure on currencies from emerging markets, Index reports. Since early October, the forint has struggled to exit the 400 range against the euro, but recent election developments pushed it down further, with Tuesday’s rates briefly hitting the 410 mark. Following some market corrections, the forint improved slightly, but the currency remains highly volatile.

Donald Trump and Kamala Harris. As the U.S. presidential election introduces a wave of uncertainty into global markets, the forint has shrunk to a two-year low against the euro. Photo: MTI/EPA/The Washington Post pool/Demetrius Freeman

A stronger dollar generally spells trouble for emerging-market currencies, including the forint, as it raises the cost of imports and impacts inflation. According to analysts, a potential Trump victory could bring an aggressive U.S. economic and trade policy, sparking expectations of higher inflation and interest rates in the U.S., and causing the dollar to strengthen further. In turn, this would likely prolong the forint’s weakened position, potentially keeping it over 410 EUR/HUF.

Hungarian economy’s high exposure to U.S. trade shifts

Hungary’s economy, alongside other Central and Eastern European countries, could be significantly impacted by a U.S. Republican victory due to its exposure to the U.S. market. Last year, Hungarian exports to the U.S. totalled nearly USD 11 billion, while imports remained around USD 3 billion. A Trump win could bring protectionist measures, including higher tariffs, that may create hurdles for Hungary’s export-driven economy. In addition to currency fluctuations, tariffs would add cost pressures on Hungarian products entering the American market, potentially reducing demand and impacting Hungary’s trade balance.

What a Democratic victory might mean for the forint

Photo: depositphotos.com

Alternatively, if Kamala Harris were to win, the dollar might lose some of its recent momentum, easing pressure on emerging-market currencies. Additionally, the continuation of Democratic trade policies would likely mean lower tariffs, a development favourable for Hungary’s trade position with the U.S. Analysts believe a Democratic administration would favour looser fiscal policies, which could stabilise or even weaken the dollar, giving the forint some breathing room. This outcome could mean the forint regains strength and moves back below the 410 EUR/HUF threshold.

Market volatility likely to persist

Regardless of the presidential election’s outcome, the forint is expected to remain volatile in the coming weeks. Following Tuesday’s election, traders are closely watching the Federal Reserve’s upcoming interest rate decision, with a 25 basis point cut anticipated by market players. This potential rate cut would add further complexity to currency markets, affecting the forint’s performance and prompting further adjustments in the dollar’s value.

While the Hungarian forint has suffered in the wake of the presidential election’s unpredictability, analysts caution that additional fluctuations are possible as results unfold and global investors react. Both U.S. presidential candidates have pledged expansive fiscal programs that would increase America’s national debt substantially. The projected debt increase is notably higher under Trump’s plan, which could drive inflation and influence the dollar’s strength in the long term.

For Hungary, this U.S. presidential election and its financial ripples underscore how connected emerging markets are to U.S. political outcomes. As volatility continues, businesses and consumers in Hungary may need to brace for continued adjustments in the exchange rate, which could impact everyday costs and Hungary’s broader economic landscape.

UPDATE: Whoever wins, the forint is in a hard situation

The Hungarian forint has weakened significantly due to uncertainties surrounding the U.S. presidential election, reaching a 23-month low against the dollar and remaining weak against the euro. Analysts indicate that Donald Trump’s potential victory is strengthening the dollar, as his administration is expected to pursue loose fiscal and strict monetary policies. However, even if Kamala Harris were elected, the forint would still be negatively affected due to diplomatic tensions between Hungary and the U.S. According to Index, experts from Gránit Alapkezelő and Makronóm agree that the forint’s depreciation would likely continue regardless of the election outcome. The upcoming Federal Reserve decisions and domestic monetary policies may help stabilise the forint, though no interest rate cuts from the Hungarian National Bank are expected.

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• Forint in uncontrolled decline, crossing multiple lows: when will it stop?