This week, Hungarian Forint has reached its lowest level ever. On Monday, 1 EUR was HUF 372.21.
After having reached two historic lows against Euro last November, we did not expect that soon the Hungarian Forint would reach its lowest level ever.
As a result of the Russian-Ukrainian war, the new historic low of the Hungarian currency has been reached today.
As the Hungarian news portal hvg reports, Hungarian Forint started to fall last Thursday, minutes after the Russian attack. On Thursday, the value of the forint depreciated by 10 points in one day, reaching the 370 level by the end of the day. On the weekend, a slight improvement could be observed. Investors calmed down a little and the Hungarian currency started at 367 on Monday morning.
During the day, however, it quickly started to fall, and as soon as European stock markets opened,
Hungarian Forint has reached its lowest level ever: 1 EUR was HUF 372.21.
According to Portfolio, the weakening is not due to Forint-specific factors.
The primary reason behind the weakening of the Hungarian currency is the Russian-Ukrainian war.
The conflict has triggered a general risk aversion in the market, as investors seek to get rid of any assets that are even slightly risky. This is affecting all emerging currencies, including the forint, while currencies that are considered safe, such as the dollar, the Japanese yen and the Swiss franc, are strengthening.
It is difficult to counter the weakening. Even if the Central Bank of Hungary cannot influence international sentiment, it does have the means to dampen these effects. One option is intervention in the foreign exchange market, but it is questionable how successful this can be in a situation like the current one.
Another practical option for the central bank is to raise interest rates. Last week, as in January, the base rate was raised by 50 basis points and the one-week policy rate by 30 basis points. Based on the communication so far, the next tightening is not expected until the end of March, but the MNB has always reserved the right to flexibly raise the one-week rate in response to market volatility. The question is whether they intend to react to the current market situation.
March 1, 2022: Hungarian forint sinks steadily, reaching a historic low against the euro. Read details HERE.
Source: hvg.hu, portfolio.hu