Hungarian forint plummets, 400 EUR/HUF dangerously close
The Hungarian forint has faced multiple setbacks recently, resulting in a significant downturn. The currency’s future remains uncertain, with its decline showing no clear end.
On Wednesday, the forint’s value dropped sharply. It began the day trading around 390 to the euro and 359.5 to the dollar, but these levels quickly became outdated, Világgazdaság reports. By the end of the trading day, the forint had depreciated by 0.84%, reaching 393.45 against the euro, and by 0.72%, falling to 362.12 against the dollar.
Reasons behind the weakening of the forint
Several factors have contributed to this steep decline:
- The Hungarian National Bank (MNB) recently announced an interest rate cut.
- Following this, MNB Deputy Governor Barnabás Virág indicated that one or possibly two more rate cuts could occur this year.
- Additionally, new data from the Purchasing Managers Index (PMI) suggests continued economic contraction in Europe’s largest economy.
The weak German PMI figures indicate low inflationary pressures, which typically lead to expectations of further interest rate cuts. This, combined with the MNB’s potential future rate reductions, suggests that the forint might lose further support both domestically and across Europe, forecasting a continued weakening trend.
Investors, likely alarmed by the narrowing interest rate differential in Hungary and ongoing political issues, seem to be withdrawing from the Hungarian market. The full extent of the forint’s potential decline is difficult to predict, but some analysts have suggested that an exchange rate of 425 to the euro could be possible by summer.
Read also:
- Hungarian central bank makes base rate cut decision
- Official figures: Hungarian wages keep growing – do you earn this much?
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