Hungarian forint may collapse next week

The Hungarian forint strengthened against the euro and the dollar in the last few weeks and reached an annual peak this Tuesday. However, the Hungarian National Bank seems committed to limiting that trend, and the institution already made a decision this week that tossed the forint on the slope. The Hungarian national currency did not start to fall, but the exchange rate decreased by more than HUF 10 per euro. Next week, further negative announcements are expected, affecting the value of the forint.

According to index.hu, on Tuesday, the forint-euro exchange rate decreased below 370, while we had to pay only HUF 339 for one USD. That meant an annual peak against the euro of 369.52/EUR. However, the Hungarian National Bank intervened and talked about a possible loosening in Hungary’s interest policy. As a result, the forint started to fall again and did not stop until 380/EUR. Even though the forint could strengthen by the end of this week to 376/EUR, further negative interventions are expected next week.

Experts say the Monetary Council will narrow the upper end of the interest rate margin. But they will keep the interest rate high during the spring. That is because the forint remained vulnerable considering the financial turbulences of the last few weeks, especially the American bank crisis.

Forint exchange rate determined by the National Bank and the Monetary Council

The national bank did not change the base interest rate in January. That remained at 13 percent and probably will be unchanged next week. Furthermore, the quick deposit will also remain at 18 percent. The latter will only be decreased if the inflation’s moderation rate is steeper and the Hungarian economy’s assessment gets better. That is expected to happen only in the summer. Experts believe the base interest rate will only be decreased in the second half of 2023.

Meanwhile, some crucial economic and social data will be published next week. The Hungarian Central Statistical Office (KSH) will announce the average increase in gross salaries on 26 April, while they will publish the unemployment rate on 28 April.

However, the forint’s exchange rate will be determined by the decisions of the national bank. Of course, we will follow the developments.

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3 Comments

Larry says:

23/04/2023 at 13:21

Central Bank Rates
Hungary – 13%, European Central Bank 3.5%, Bank of England 4.25%, US FED 5%, Canada 4.5%
What does this tell you? Two things. Hungary’s inflation rate is completely out of control. Hungary needs extreme bank rates to prop up its’ currency. Fidesz puts out propaganda about how fantastic the Hungarian economy is. Bond rating agencies live in the real world. Standard and Poor’s downgraded Hungary’s credit rating to BBB- which is the absolute last level that could be considered investment grade. If Hungary’s credit rating goes down one more notch Hungary’s bonds will be considered non-investment speculative grade. That is a direct assessment of the financial solvency of Hungary.
Threadneedle Street; says:

23/04/2023 at 14:01

Is that RIGHT.
Amazing, over the past 4 weeks, articles nearly on a daily basic’s from a variety of sources, have been “singing the praises” of the Strong resilience of the Hungarian forint.
If, as predicted in this latest article in fact doesn’t eventuate, be patient, as sooner than later, it will endure a cataclysmic collapse.
"Now this is Not the End"; says:

23/04/2023 at 17:20

Larry & Threadneddle Street – what more EVIDENCE do you need, other than to say, as has been the FACT pre February 2020, but post that time certainly, that the Hungarian Economy, is Insolvent.
Interesting to know how the Gold Reserves are travelling //
It STILL astounds me, that in there millions Hungarians who BELIEVE they can stand ALONE – don’t need the European Union nor relationships with “other” major countries Governed under DEMOCRACY.
This medical condition of cerebral impairment – SADDENS me, those millions, who THINK that Hungary can be LONERS.
It is not even the beginning of the end of what will occur in the Economy of Hungary.