Hungarian forint hit another historic low!

The Hungarian forint hit a new historic low against the Polish zloty following an unexpected decision of the Czech national bank.

According to portfolio.hu, the Czech koruna affected the exchange rate of the Hungarian forint the most in the second half of this week. The Czech national bank implemented a higher base rate cut than experts calculated before. As a result, the Czech currency started to plummet and reached a two-year historic low.

Meanwhile, the Polish zloty was able to strengthen even on Thursday. And that was enough for the forint to reach a historic low against the Polish national currency. The PLN/HUF exchange rate stands at 89.9/1 even now. The Hungarian currency set the previous historic low in November 2022 when it was almost in a free fall against the euro reaching even 430/EUR.

The reason behind the strong zloty and weak forint is that the Polish National Bank did not modify its base rate. Meanwhile, the Hungarian national bank cut it by 75 base points. Even though that was lower than the market expected, the forint could not evade weakening. The base rates stand at 10% in Hungary and 5.75% in Poland, which means that Hungary’s relative base rate advantage decreased.

Additional reasons explaining the weak forint

Furthermore, Hungarian assets are less attractive due to the bad EU-Hungary relationship, even though Orbán gave the green light for the EUR 50 billion Ukraine aid last week.

Moreover, Hungary’s annual budget was worrisome in 2023. As a result, even the 2024 budget is risky. That is why the Hungarian government will modify its annual target deficit from 2.9% to 4.5%.

Finally, Hungary has been blocking Sweden’s NATO accession for almost two years now, and it does not seem like the issue will be concluded in days. On the contrary, Orbán expected the Swedish prime minister to come to Budapest before the parliament accepted Stockholm’s bid, but Ulf Kristersson said there was no reason for that.

Such conflicts increase anxiety in investors and make the forint vulnerable.

Currently, we have to pay more than HUF 388 for one euro.

Read also:

• Hungarian forint fell sharply in the last few days, but today there is hope – Read more HERE
• 5 and 10 forints coins will be withdrawn, HUF 50-100,000 banknotes will be issued in Hungary? – Details in THIS article