The Hungarian forint strengthened against both the euro and the US dollar on Friday, supported by falling oil prices and weaker-than-expected US labour market data.
The Hungarian forint has enjoyed a stronger period since Hungary’s parliamentary election earlier this year, helped by improving investor sentiment, expectations surrounding EU funds and the government’s plans for eventual euro adoption. Friday brought another notable move, although the currency was far from stable throughout the session.
Friday brought another volatile session. The forint briefly strengthened below HUF 368 per euro and HUF 326 per dollar, before giving back part of those gains later in the day. The National Bank of Hungary’s official exchange rates for 2 October were HUF 367.87 per euro and HUF 326.94 per US dollar.
The National Bank of Hungary’s official exchange rates for 2 October were HUF 367.87 per euro and HUF 326.94 per US dollar.
Oil prices gave the forint a boost
Oil dropped by more than 3 percent during the day, with Brent crude falling back towards USD 100 per barrel after news that additional strategic fuel reserves could be released onto the market.
Lower oil prices are generally supportive for Hungary because the country is a major energy importer. A lower import bill can reduce pressure on the trade balance and ease some of the inflationary risks associated with expensive energy.
Portfolio noted that the combination of cheaper oil and changing expectations on US interest rates created a more favourable environment for the forint during Friday trading.
Weak US jobs report puts pressure on the dollar
The other major market-moving event came from the United States. The US economy added just 29,000 non-farm jobs in September, far below the roughly 90,000 expected by economists. August’s figure was also revised lower, while the unemployment rate rose to 4.2 percent.
The weaker-than-expected figures reduced expectations that the US Federal Reserve would raise interest rates again at its October meeting. The dollar weakened after the release, while stock markets moved higher.
A weaker dollar can provide support to emerging-market currencies such as the forint, particularly when global investors become more willing to take on risk.
If you missed it: Danube water levels could fall way below 200-year low
Global markets remain volatile
Friday’s move came after several difficult sessions for European currencies.
The US dollar has strengthened significantly in recent weeks, supported by high US Treasury yields and expectations that American monetary policy could remain tight for longer. The euro has also come under pressure amid fiscal and political concerns in several European countries.
At the same time, energy prices and geopolitical uncertainty continue to produce sharp movements across financial markets. For the forint, this means that favourable developments such as falling oil prices or a weaker dollar can provide short-term support, but international market sentiment remains an important source of volatility.
Read more from us: PM Magyar demands apology from priest after he attacked Tisza voters in sermon
