No stopping: Hungarian forint at a new low

1 Comment

1. Larry says:

   20/05/2023 at 16:45

   I called the upcoming Forint reversal about six weeks ago on an earlier Daily News Hungary article. The forint was drastically undervalued mid 2022 bringing it far away from its’ multi-year trend line. It appreciated considerably bringing it back to the trend-line. This obviously was caused by the massive interest rate hike by the Hungarian Central Bank to push down inflation. The international “carry trade” where large traders borrow at low interest in Euros or Dollars to convert into forints and purchase high interest short-term forint bonds or interest bearing accounts pushed up the forint. As soon as there is a perception that there will be interest rate cuts in Hungary and a reversal in the currency investors will reverse their carry trade thus selling their forints to convert back into Euros or Dollars to close out their loans. The problem now is that as the forint falls the price of imported goods will rise thus creating inflation in consumer goods. I am quite pessimistic about Hungary’s economic prospects in the near to medium term. The government has squandered billions of dollars on its’ conservative think tanks such as the Danube Institute and purchases it can’t afford and doesn’t need such as Vodafone Hungary. It wanted to spend $1.8 billion on a Chinese university in Budapest which it thankfully shelved. That’s where taxpayer money goes instead to fund schools or health.