Remarkable achievement: Hungarian forint becomes one of the best in the world

The Hungarian forint has experienced a remarkable turnaround this year, following its historic low in the previous year. Since the beginning of 2023, the currency has appreciated by nearly 7 percent against the euro and 8.3 percent against the dollar.

Although the Hungarian National Bank (MNB) started reducing the policy rate in May, it did not weaken the forint significantly. This was due to the continued high interest rates in Hungary, writes Portfolio.

Behind the scenes

Reports from the market indicate that the benchmark interest rate increase to 18 percent has made the forint one of the most sought-after investments. Not only in the region, but globally as well. The high interest rate level presents favourable conditions for carry trades, enabling investors to benefit from significant interest rate differentials even without significant exchange rate fluctuations.

The substantial strengthening of the forint cannot be solely attributed to the high interest rates. Other contributing factors include positive international sentiment, the depreciation of the dollar and the decline in global natural gas prices over the past six months. Improved investor sentiment towards emerging markets and the favourable external position of the Hungarian economy, which heavily relies on energy imports, have also played significant roles.

Hungarian forint on the roll

Since last October, the forint has emerged as one of the world’s preferred investments. The currency has witnessed a nearly 20 percent increase against the euro from its lowest point. The performance of the forint this year further confirms its exceptional performance, surpassing most other currencies.