Hungarian forint fell sharply, not helped by the news from America

The forint was able to strengthen on Monday morning after three important announcements from the US authorities on Sunday night, which eased concerns about the overall problems in the US banking system and strengthened risk appetite. However, all this was reversed in the morning as foreign risk appetite deteriorated sharply again and this also started to weigh on the forint, which fell to a one-month low.

Market perceptions of the state of the US banking system and its potential impact on the Fed’s rate hike plans will continue to drag on the forint for the rest of the week, Portfolio writes.

Around noon, it was also reported that after a rapid fall in the last half hour, a turnaround in the forint exchange rate was seen: the euro’s rate fell back from above 388 to below 387, while the dollar’s rate dropped from 364 to around 362. However, before one hour, it was reported that the euro had jumped back above 388 on the interbank forint market and the dollar to 364, amid continuing negative international investor sentiment.

This means that concerns about the US banking system (and its potential spill-over effects) have not yet subsided, even with the coordinated US announcements last night. In fact, the market may now be driven by a “flight to safety at any cost”, as such a major bank failure happened almost overnight and many investors are now running for cover until valuations are completed and the “storm” subsides.

Before 2pm, sellers were again on the attack, with the euro trading above 392, at 393.4 forints. After a rapid fall in the forint in the early afternoon, which also saw euro quotes above 393, a slight stabilisation and easing was seen around a quarter to three, with euro quotes hovering around 391.

But, as the portal wrote, this still means that the forint is trading almost 10 points above its morning quotes and has fallen sharply compared to the rest of the regional currencies, with the Polish zloty and the Czech koruna only down around 0.4-0.5%.

Against this backdrop, America was rocked by a bank failure not seen since the 2008 financial crisis, after depositors stormed Silicon Valley Bank, known as a bank for start-ups, last week. On Sunday, the Fed announced extraordinary measures to prevent financial contagion, and it emerged that another financial institution, Signature Bank, had been ordered to close by regulators. On Monday, there were still big questions about the consequences of the bank failure.

read also: Hungarians get rid of the forint, use foreign currencies

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4 Comments

Valnerability - to the Down Side; says:

13/03/2023 at 19:14

The forint, likened to plasticine.
NOTHING to suggest, it will hold together and give way – sooner than later.
The longer the inevitability that we go Euro in Hungary, or run “Joint” currency with the Euro, whilst we continue to BELIEVE there is a FUTURE in the Forint, the deeper damage to our dangerously “Softening” Economy we are creating.
Would imagine our Gold reserves continue to PLUMMET/
Márk says:

13/03/2023 at 22:31

It might not seem like it, because of the financial shenanigans, but the Forint has way better fundamentals then the Euro.

The problem is, that it’s a fiat currency, so it’s price is based on the financial superstitions of the “Germany good, Eastern Europe bad”. But the gold/capita for Hungary is equal to the USA, it is far better then the euro area. For debt/gdp, the picture is also similar. Hungary is way better then the Euro area. It has 73% debt/gdp, while Germany has 70%. Compare it to Spain, France of Italy with 200%.

Not just the fundamentals are that matter, but politically the Euro is a terrible mistake too. The Eu is hating on Hungary, and is in the process of trying to take Hungary’s voting right (article 7) since 2018. If the Eu has the right to print the Hungarian currency, the ECB would just say to Hungary: “Obey to let migrants in , and let podophiles into schools, or no money for you”, similarly as they blackmailed Cyprus, and Greece. If that happens, Hungary would be just as much a slave of Brussels, as Greece is.

Hungary has a high inflation rate, sure, but the wages increases are in fact keeping up with it. That is not happening in euro, or usd. And we are talking about the government-lied “inflation” in all three cases.

Hungary, as it did, can restrict it’s own spending. But Hungary can’t enforce financial common-sense on Cyprus. Unless Hungary is prepared to declare war on an Eu member. Inflation comes from government deficits. So the Hungarian government can, and DO control the inflation. And people can retort on the next election. For the Euro, the inflation comes from the ECB’s policies. Therefore it is literally impossible, even theoretically for a Hungarian voter to have any effect on Euro inflation.

Again, there is NOTHING worse for Hungary then the Euro.
FV says:

13/03/2023 at 23:14

@Mark, I’m speechless 😶
Norbert says:

14/03/2023 at 10:40

Uh. Unfortunately, we fund our debt with the highest (by a margin) bonds in Europe (8.61 percent, currently).

That’s DOUBLE of Greece, and even more compared to Spain, France or Italy.

https://tradingeconomics.com/hungary/government-bond-yield

Now for the news – we signed up to adopt the Euro … At some point, we WILL make the metrics:

https://economy-finance.ec.europa.eu/euro/eu-countries-and-euro/hungary-and-euro_en