Hungarian forint may weaken soon: when should we buy currency?

Throughout the week, the forint firmed significantly, nearly approaching the 370 thresholds against the euro. According to experts, the Hungarian currency may only creep back to as low as 365 per euro if positive news emerges regarding the EU funds.

Unfortunately, it is more likely that the Hungarian currency will further weaken in the coming months. This makes the current exchange rate ideal for converting HUF to EUR. While major European stock exchanges performed poorly this week, the Hungarian BUX index soared, writes Index.

 Teetering performance of HUF

On Monday morning, the forint was trading nearly at 374 to the euro, but on Tuesday, it underwent sharp fluctuations. The Hungarian currency initially began to strengthen after the National Bank of Hungary (MNB) cut its one-day deposit tender rate by one 100 basis points. The momentum of the forint persisted until the end of the week, almost reaching the 370 thresholds. However, according to analyst Zoltán Varga, the Hungarian currency may only reach a rate as low as 365 against the euro if positive news emerges regarding EU funds.

On Saturday at 10 AM, one euro was worth around 371 Hungarian forints. Analysts do not expect any further significant strengthening. For this reason, it may be an ideal time to exchange euros while the common European currency is valued at around 370 forints. The long-term weakening of the forint is almost inevitable. Several analysts expect the euro to reach around 400 by the end of the year. During Thursday’s Government Info press conference, Minister of Finance Mihály Varga revealed that they are calculating a euro exchange rate of 385 forints by 2024.

Favourable real interest rates

According to Barnabás Virág, Deputy Governor of the Hungarian Central Bank, real interest rates will turn positive by the end of the year. The supportive fiscal policy and regulatory measures against inflation driven by profits are expected to lead to a decrease in inflation. To sustain this in the medium term, policies that boost productivity need to be pursued. Virág believes that in the second quarter, deflationary trends have emerged and will continue to strengthen, resulting in a decrease in both overall and core inflation.

“In several sectors, not only have price adjustments stopped, but prices have also dropped. In April, there were already several price reductions, especially in product categories exposed to the foreign exchange market,”

said the deputy governor.

Source: Index