Forint skyrockets to 11-month high: could now be the perfect time to exchange?
The Hungarian forint showed remarkable strength on Friday, pushing its value to levels not seen since last September. The domestic currency closed the day at 395.3 against the euro, marking nearly a 4% gain since the start of the year. Against the US dollar, the forint climbed to 339.6, while the Swiss franc fell to 420.2, signalling broad-based appreciation across major currencies.
Inflation surprises market, keeps interest rates elevated
This sharp rally comes amid a surprising mix of economic data and geopolitical developments. July’s inflation rate climbed to 4.3%, exceeding market expectations. While higher inflation is usually a negative sign for a currency, in Hungary’s case, it boosted the forint.
The unexpected inflation figure makes an interest rate cut by the National Bank of Hungary unlikely in the near term, keeping the benchmark rate at a relatively high 6.5%. This elevated interest rate environment attracts foreign investors seeking higher returns on forint-denominated assets such as government bonds, thus driving up demand for the currency.
Geopolitical factors add to positive sentiment
In parallel, positive investor sentiment was stirred by news of an upcoming meeting between US President Donald Trump and Russian President Vladimir Putin. Rumours that Hungary might even host this high-profile summit added to the upbeat market mood. The anticipation of easing geopolitical tensions is seen as a further factor bolstering the forint.
Despite the strong currency performance, inflationary pressures remain a concern for Hungarian consumers. Food prices surged notably last month, with products like peaches jumping by over 85% year-on-year, Index writes. Other staples, including eggs, flour-based sweets, fruit and vegetable juices, cooking oil, and baked goods, all registered significant price increases. On the flip side, prices for margarine, flour, sugar, processed meats, dairy products, and pork declined.
Outlook: Inflation battle continues, watch government policies
Looking ahead, the National Bank’s fight against inflation is far from over. The official inflation target stands at 3%, well below current levels, and rate cuts are unlikely until inflation slows meaningfully. Furthermore, government policies such as the potential removal of price margin caps on certain goods may exacerbate inflationary pressures in the coming months.
Is now the time to exchange currency?
For individuals holding forints or planning to exchange money, the current strength of the Hungarian currency presents an attractive opportunity to convert to major foreign currencies. However, given the volatile global economic and political landscape, experts advise monitoring developments closely before making major currency moves.
Read more forint-related news on Daily News Hungary.
Read also:
- What is the problem with the Hungarian euro? National Bank Governor Varga explains
- Hungarian forint outperforms peers in early 2025, boosting travel budgets