Hungarian forint at breaking point: Near-historic low against pound sparks concern
The Hungarian forint has plummeted to a two-year low against the British pound, with HUF 501.5 required to purchase a single GBP on Monday morning. This is just shy of the all-time record of HUF 502.9, illustrating the domestic currency’s sustained weakness. The euro-forint exchange rate has also breached new lows, with the common European currency trading above HUF 415, marking its weakest performance in two years.
Weakening: Regional and global factors in play
The Hungarian forint’s poor performance extends beyond major currencies, as it also hit unprecedented lows against the Polish złoty and the Czech koruna, Világgazdaság reports. Analysts point to several key factors driving the depreciation. Chief among them is Moody’s recent downgrade of Hungary’s credit rating outlook from stable to negative. This shift, announced late last Friday, has shaken investor confidence, prompting a reassessment of regional holdings.
The downgrade reflects concerns over Hungary’s governance and its potential loss of EU funds, exacerbating fears about the country’s fiscal stability. Simultaneously, global market trends have added to the pressure, with the US dollar gaining strength. The dollar index (DXY), which measures the greenback against a basket of currencies, climbed 0.47%, signalling broad-based demand for safer assets.
Policy dilemma: Balancing rates and stability
Economic experts like Viktor Zsiday, portfolio manager at Citadella Fund, highlight deeper systemic issues. In Portfolio’s article, Zsiday argues that Hungary’s current interest rate policies are insufficient to stabilise the currency. Despite recent rate cuts aimed at stimulating growth, these adjustments have inadvertently fueled the Hungarian forint’s slide.
Zsiday outlines two potential paths forward: continued rate cuts, which risk further depreciation and heightened inflation, or raising rates to attract investors and stabilise the forint. However, both options come with significant economic trade-offs. He also underscores that the root cause of investor apprehension lies in Hungary’s economic policies and political risks, which only the government can address.
Hungarian forint: creator of challenging environments
The weak forint creates a challenging environment for businesses and consumers alike. With Hungary heavily reliant on imports, the currency’s depreciation inflates the cost of goods, fueling domestic inflation. This, coupled with high interest rates, creates a precarious economic environment. Hungary’s monetary policymakers face mounting pressure to restore investor confidence while balancing domestic economic needs. Yet without significant reforms or shifts in fiscal policy, stabilising the forint may remain a distant goal.
At 5 PM, the EUR/HUF exchange rate was above the 415 level with one euro costing HUF 415.07. The GBP/HUF rate had not improved too much by 5 PM, with one pound costing HUF 500.62 at the time of writing this piece. As for the US dollar, one greenback cost HUF 396.73 at 5 PM on Monday.
Read also:
- Moody’s credit rating agency warned Hungary changing outlook to negative
- Forint hits new low against the euro as exchange rate surges past 413
- Hungarian forint hits new 2-year low against the euro, attempts to recover
Featured image: depositphotos.com
As Mr. Bóka insists – we are an example to all! Facts, data and Politicians for you.
It will WORSEN.
The “Worth” of the Forint, just continues into Oblivion.
Increasing pressurization, cascading, engulfing ALL the major componentry of the Hungarian economy, that NO end to this “torrent” – this “Deluge” in fact, can be seen, that could be a stabilization point, that shreds, gives indication, the on-going downfall or collapse of the Hungarian economy is near FACT.
The Central Bank of Hungary, that are SUBSERVIENT – to the Orban led Fidesz Government of Hungary, there Minister of Finance – Mihaly Varga, principally “calling the shots” – from his desk, the making of decisions on interest rates in Hungary, that CONFIRMS – that Mihaly Varga AGAIN – just as he has, his Policy’s as the Finance Minister of Hungary, in sending Hungary’s Financial & Economic position, into, on the “Cusp” of near devastation – collapse.
The decision, “powered” by Varga, the Governments influence over the Central Bank of Hungary, to leave interest rates at there current level, being 6.5% – continuous rhetoric or “propaganda” – arising out of the Finance Minister in belief, the Hungarian economy can sustain Justify and afford – the interest rate at its present % – proves AGAIN – the Orban led Government of Hungary – the Minister of Finance – Mihaly Varga, they, jointly, with the Hungarian Central Bank – have got it WRONG.
Do the Maths – using February 2020 as a starting point, remembering from that date – the entire Housing & Construction Industry in Hungary inclusive of Hotels, the GROWTH of it.
The Hungarian Economy post February 2020 – do the maths, the Economic & Financial performance of Hungary in those nearing (5) five years which HIGHLIGHTS – the interest level of 6.5% currently in Hungary, is un-justified.
The “mauling” on-going of the Forint, that displays vividly / clearly, the LACK of confidence in it’s WORTH, not helped by Hungary, being an importer, that cost factor(s) will “sky rocket” being Hungary, that is reliant on Imports.
Inflation in Hungary – will RISE.
Mihaly Varga, as the Finance Minister of Hungary near on a decade “in that chair” plus “other” years, he has held position(s) of influence, in the Economic & Financial “landscape” of Hungary, his performance, reputation, what he has DELIVERED Hungary – is an ABOMINATION.
The “subservient” role, played out by the Central Bank of Hungary, under “orders” principally from the desk of Mihaly Varga, as the Minister of Finance of the Orban led Fidesz Government of Hungary, that in announcement, in recent days, that Varga, will be the “incumbent” next Governor of the Central Bank of Hungary is ABOMINAL.
We should feel sorry for all those Hungarians whose wages are paid by Forint, but they have a chance to get rid of Orbán’s dumb cronies in the next election.
Just look at the history of Forint since Orbán with his economically unintelligent chums got the right to govern.
Those involved should have had lessons abroad in the West in economics and finance.
In the past, sadly, the Soviets were dominating the Hungarian government and their Hungarian colleagues were not involved in economics and finance and the likes of Orbán were left without any real knowledge of the subject.
If only Orbán followed the Austrians, then Hungary would have the Euro like them, making the Hungarians equal with them.
This is far more an indication of foreign interference and financial pressure which certain western governments are exerting on the forint in an attempt to destabilise Victor Orbans government. This is in part being undertaken prior to Donald Trump’s inauguration in an effort to weaken his support in Europe