Inflation has recently reached unprecedented levels in Hungary. On Friday afternoon, the Hungarian currency reached a new historic low, with one euro selling for more than 386 forints on the domestic interbank foreign exchange market.
According to Portfolio.hu, the region’s currencies have weakened significantly in recent days due to the Russian-Ukrainian war. However, the pressure could gradually ease, according to a Reuters poll of analysts.
The forint, the Polish zloty, and the Czech koruna have also weakened drastically in recent days, with the Hungarian currency falling to a new all-time low of over 383 against the euro on Wednesday.
This is mainly a result of international risk aversion caused by the Russian-Ukrainian war, with investors now looking to currencies seen as safe havens, Portfolio.hu writes.
According to mfor.hu, the Bank of Hungary’s interest rate hike on Thursday proved to be ineffective, raising the interest rate on one-week deposits by 75 basis points to 5.35%. Considering that the euro started this week below 370 forints – meaning that the domestic currency has weakened by 16 units in just five days -, if this insane weakening is not curbed,
the EU currency could cross the psychological 400 forint mark within days.
Dávid Németh, a senior analyst at K&H Bank, told hvg.hu that the weakening mainly affects regional currencies, not the emerging market in general. While the forint, the zloty, and the Czech koruna weakened 7-9 per cent against the dollar compared to levels before the Russian attack on Ukraine, the Turkish lira and the South African rand lost 3 per cent, while South American currencies only half a per cent.
Barnabás Virág, the deputy governor of the Bank of Hungary, told Reuters on Tuesday after the forint weakened at a very rapid pace that the central bank was ready to do anything to stop the Hungarian currency’s fall. According to 444.hu, it is certain that the weakening of the forint will quickly be discernible in prices, meaning that inflation could accelerate further.
“Unfortunately, it is clear that central bank measures cannot reverse the trends, as the Russian-Ukrainian military conflict would need to ease,”