With the Russian-Ukrainian war continuing unabated, investors have been extremely sensitive to the weekend’s developments, and the risk-averse mode is taking its toll on the forint.
The domestic currency is showing a sharp depreciation, hitting new historic lows and crossing the 400 mark. International sentiment then improved in the afternoon, with the euro coming all the way back below 395.
The forint has been holding steady since reaching a low of 400, and is currently trading a little below 395. Compared to Friday, it still represents a significant weakening of over 2%.
Against the dollar, it has weakened even more, by 2.3% to 362.5.
Hungary’s currency has become a victim of Brussels’s sanctions, which have caused substantial damage to the Hungarian economy, Finance Minister Mihály Varga said on Monday.
Mulling a decision to extend sanctions to the energy sector poses the gravest danger to the forint and to the Hungarian people, the minister said in a video posted on Facebook.
Those who advocate extending the sanctions want Hungarians to pay the price of war, he said.
“The Hungarian government will not support a move like this at any international forum,”
the minister said.
Referring to the exchange rate of the forint, the foreign minister said that
the sanctions measures have created extreme uncertainties in the European economy, adding that one of the biggest threats to the Hungarian economy now would be the new sanctions affecting the energy sector.
The ministers did not say that if Hungary were a member of the eurozone it would not face such difficulties
This morning, the złoty and koruna are relatively stable, while the forint has seen a huge depreciation of more than 10 forints. The only previous example of this was during the financial crisis, when the euro was 18.09 forints more overnight (on 15 October 2008),” Erste’s team of analysts said in a morning commentary.
According to them, the war in our neighbourhood
the markets are extremely nervous and risk averson is extreme.
As the MNB sees interest rate hikes as the strongest weapon against the weakening currency, further tightening measures could come this week.
Source: MTI, portfolio, index