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EU funding delayed, 430 EUR/HUF may return

forint exchange rate - daily news hungary

The forint fell sharply against other currencies on Thursday, 24 November. The euro rose above 415, while the dollar is close to 400. Experts say there are ominous signs in the exchange rate, which could return to a record weak 430 EUR/HUF.

On Thursday, the forint started to fall after bad news from Brussels. Those bad news were that EU funds are still uncertain and Hungary will probably have to wait until at least March for approval, napi.hu reports. The euro rose above 415 forints and the dollar jumped to around 400. This is not a good sign, experts say.

Equilor’s analysis on EUR/HUF

“An ominous technical formation has appeared on the euro-forint chart, an inverted head and shoulders with a 415 neckline. Today, the rate has already attempted to break the level, which would result in a target price of 430. All indicators are pointing up, with a good chance for further upside. Of course, the news on EU funds remains a major source of uncertainty, but yesterday’s information could set the stage for a bigger weakening of the forint,” Equilor said in its analysis.

The EU may suspend billions of euros

The EUR/HUF has already started to see a lot of movement on Wednesday. It was after press reports that the European Commission may propose to the Council to suspend EUR 7.5 billion of aid. This would be a less favourable scenario from a Hungarian point of view than expected. Preliminary reports had suggested that a smaller amount would be withheld. Following the news, the EUR/HUF started to rise, approaching the 413 forint level within a day, KBC Equitas said this morning.

Hungary’s anti-corruption steps were not convincing

Next week, the Council will decide on the issue, but the Commission’s assessment will be the decisive one, Forbes writes. Bloomberg reports that the European Commission is unhappy with Hungary’s anti-corruption commitments. Thus, it will propose suspending EUR 7.5 billion in catch-up funding. That is more than previously leaked, according to Germany’s FAZ.

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Read alsoEP votes to recommend freezing Hungary funding — UPDATED

Hungarian forint: the situation is promising, serious strengthening is expected

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The forint broke a two-month positive record on Monday and held up well on Tuesday. The euro was trading just above 400 forints yesterday, but experts see more and more chances for a strengthening.

The euro was already trading below 400 against the forint on Monday. This is not only good news from a psychological point of view, napi.hu writes. Technical analysis suggests that this is also the point of resistance that, if broken, could lead to further gains for the Hungarian currency.

After Tuesday’s opening, speculators tried in vain to weaken the Hungarian currency. They succeeded, but only for a few seconds: the euro suddenly jumped above 402 forints. And then, the forint started to strengthen again. The euro was back around 401 forints a few minutes after the opening. The dollar was also below 401, the Swiss franc was below 405 forints and the pound was around 460.

The agreement on EU funds could fuel the rocket under the forint and further strengthen the Hungarian currency.

“The EUR/HUF has started a downward trend, which is very positive news for the Hungarian currency. Yesterday, the exchange rate was able to dip below 400 forints, and the weakening of the dollar may have given the forint a further boost,” KBC Equitas said. “The decision on EU funding is the one that investors should really look forward to, with more positive news coming out recently that positions are converging,” they added.

“The euro-forint exchange rate has tested firm supports. It dipped below 400 in Monday’s trading session and then started a correction from there, but the technical picture remains down. The 399.60-400.00 range can be marked as support, while short-term resistance has formed at 405,” napi.hu quoted Equilor as saying.

High inflation, words PM’s chief of staff weakened the forint

Now that the new data on October inflation is out, the forint reacted to the news as well. Inflation in Hungary in October was slightly higher than expected, to which the forint reacted with a moderate weakening. The forint continued to weaken after Gergely Gulyás, the PM’s chief of staff announced the extension of price freezes, with the euro now at 404.8, 0.6% higher than yesterday. At the same time, the EU agreement may be close: there will be concrete news in late November or early December. This could finally pull the forint out of the ditch.

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Read alsoThe forint is the strongest it has been for a while – positive prospects?

The forint is the strongest it has been for a while – positive prospects?

forint euro bills

It has been a long time since the forint has been this strong. After last week’s “rally”, it did not take long this week for the forint to move to a new psychological level, Forbes, a business magazine reports.

On Monday morning, the euro was already trading below the 400 forint level, reaching 399.2 forints shortly before 9 AM.

A Portfolio article recalls that the strengthening of the forint gained momentum on Friday along with the weakening of the dollar, with the forint up half a percent against the euro so far today.

The strengthening came after the Hungarian National Bank (MNB)’s decision this morning, with the central bank keeping the policy rate at 18 percent.

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Does the government intend to strengthen the forint exchange rate?

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The forint strengthened to such an extent that its exchange rate fell by 8 against the euro and 13 against the dollar within a day. With this, it managed to outperform some in the region, for example, it reached its peak of almost 4 weeks against the Polish zloty.

Where does the euro/forint exchange rate stand?

The exchange rate of the euro fell from HUF 413,59 at seven o’clock in the morning to HUF 407,88 on Thursday evening, and during the day, it fluctuated between HUF 406,60 and HUF 414,35, writes 24.hu. According to Forbes, on October 12, one euro was still worth HUF 432. However, since then, the forint has gotten stronger. After a low of 415, forint approached the level of 408 against the euro, reports hvg.hu. Against the dollar and the Swiss franc, the exchange rate of both was around HUF 415 on Friday evening.

The forint strengthened by 2,8 percent against the dollar

Against the dollar, the forint strengthened even more – by 2,8 percent – on Friday evening. If the forint could get stronger well below the level of 415 against the US currency, then we could even talk about a one-month forint peak. Apart from that, the forint exchange rate against the euro targeted the level of 409, which could be possible because of the weakness of the dollar and the favorable overseas stock market sentiment.

Why is the forint getting stronger?

The exchange rate movement of the forint on Friday clearly followed the movement of the euro-dollar cross exchange rate. The dollar weakened against the euro to the level of 0,98, which is its weakest level within the day, writes Portfolio. In addition, the weakening of the dollar on Friday afternoon was also good for the forint. The forint exchange rate against the euro fell below the level of 410 after 5 AM on Friday. As a result, the domestic currency is slowly returning to the levels seen in the morning, when the euro/forint exchange rate was 408.

The weakness of the dollar is visible mostly in the USD/HUF exchange rate. Here, it peaked at the 428 level within the day, compared to that, the exchange rate is already 10 units lower.

Is there an intention to strengthen the exchange rate of the forint?

In his interview with Forbes, Dániel Móricz, Investment Director of Hold Fund Management shared his thoughts about a possible intention to streghten the exchange rate of the forint. In the very long term, the forint moved roughly in line with the other currencies of the region, although the rate of devaluation was slightly faster in the case of the forint. However, in the spring and in October, it separated from the Polish zloty. Due to the uncertainty surrounding EU funds, as well as this forced tightening intention of Hungarian economic policy, Dániel Móricz does not think there is a determined tightening intention. Moreover, he does not see the intention to strengthen the forint exchange rate, either.

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Weak forint: euroisation to come in Hungary

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Hungary’s economy will be in recession, and there is a risk that the inflation rate will remain permanently high – experts at the Budapest Economic Forum said today. 

Portfolio.hu’s leading analyst István Madár was the moderator of a discussion concerning Hungary’s economic and financial prospects between Péter Ákos Bod and Viktor Zsiday at the event. Zsiday said that the government needed to stabilise the exchange rate of the forint, while Bod highlighted the importance of keeping the investors’ trust. Gainging it back will be much more difficult, he added. Zsiday and Bod agreed there was a chance that inflation would remain high in Hungary, portfolio.hu wrote.

“We should have our national currency if we can use it responsibly.” However, what happened in the last ten years, especially in the previous 18 months shows we should not stick to the forint. “We would rather join the eurozone”, Zsiday added. He also pointed out that due to the quick weakening of the forint, a spontaneous euroisation will soon start in Hungary.

Bod said that the weak national currency did not help the Hungarian economy. There will be no more Audi motors manufactured in Győr because of that. Only tourists will come in higher numbers to take advantage of Hungary’s relatively cheap restaurant and bar prices.

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Bod said it was bad news that companies requiring tremendous energy come to Hungary. That is because they increase Hungary’s energy dependency. Those factories operate with Russian gas and contribute a lot to destroying Hungary’s current account deficit.

They agreed Hungary badly needed the euro billions the European Commission refused to pay because of corruption allegations against the Hungarian EU funding system.

Read alsoIs there a chance for the forint to recover?

Forint plunge: Slovakians, Austrians swarm Hungarian markets

Slovakians Hungarians swarm Hungary forint

Residents of Slovakia have been using the euro since 2009. Austrians have been paying with the common currency of the EU for 23 years. Since the Hungarian forint has been breaking new historic lows against the dollar every week, more and more Slovakian and Austrian citizens decide to do their shopping in Hungary because their money is worth more than ever. Of course, not only Slovaks and Hungarians living in Slovakia come but also Austrians.

Austrians and Slovakians can buy much more for their euro

According to index.hu, three years earlier 1 EUR cost 330 forints. Last week, the exchange rate increased to 430 HUF/EUR. Some experts argue that it would continue to increase. Others warn of the importance of an agreement with the European Commission concerning the billions of euros locked in the EU funds.

The Hungarian central bank intervened on Friday. Thanks to a drastic interest rate rise, the forint’s exchange rate normalised a bit (418 HUF/EUR, 428HUF/USD), but its weakening is far from over, experts point out.

Based on a report from the Hungarian newspaper Új Szó in Slovakia, more foreigners swarm Hungarian supermarkets. Austrians and Slovakians can buy more for their money because of the weak forint. A resident from Rajka, a settlement close to the Slovakian-Hungarian border, said she could buy two times more meat for the same amount of money than in Slovakia. “That is a considerable difference”, she added. The situation is the same in the case of dairy products, vegetables, and fruits. Thus, those who can come to Hungary to do their shopping here.

forint exchange rate - daily news hungary
Read also13-year record: the Hungarian forint has strengthened significantly in just one day

Even cheaper products are expensive for Hungarians

Index.hu writes that the number of dairy farms ceasing operation in Hungary is rising. That is because of the soaring energy prices and the drought hitting that segment of the Hungarian economy hard. Therefore, dairy product prices will continue to increase in Hungary. In the East part of the country, fodder is a big question mark, while the energy prices pose an insoluble challenge for everybody working in the country. And the question is no longer the quality but the quantity in that respect.

Index.hu reminds us that in July, Tesco started to import chicken breast from Slovakia because there was a shortage in Hungary. That may happen in the future in the case of the neighbours’ products. Thus, it might happen that Slovakians will come to Hungarian supermarkets to buy Slovakian chicken breast cheaper than they could in their country.

 

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Read alsoGovernment’s euro introduction announcement was just a trick?

13-year record: the Hungarian forint has strengthened significantly in just one day

forint exchange rate - daily news hungary

The Hungarian forint just broke another record, and for the first time in a good while, a positive one. In terms of percentage change, the forint has not risen as much against the euro in a single day since 2 April 2009 as on Friday, according to Portfolio’s research. In terms of numbers, such a huge positive change has never happened with the Hungarian currency.

This turnaround required drastic interest rate hike announcements from the Hungarian National Bank (Magyar Nemzeti Bank, MNB), which partly aimed at unwinding speculative positions that played on the weakening forint and partly triggered the surge in strength, Portfolio reports.

In order to counteract the depreciation pressure on the forint, the MNB raised the overnight covered lending rate from 15.5 percent to 25 percent, making it very expensive to take positions against the forint. The Bank also announced a one-day quick deposit rate of 18 percent. According to the results of this, banks have injected HUF 994.8 billion of liquidity and the MNB has promised to continue to do so daily as long as it succeeds in calming market sentiment, Portfolio writes.

These concerns appeared to have calmed down by Friday afternoon. After a sharp morning surge (the euro temporarily fell from around 428 to 416 forints!), the euro remained stable around 418 forints on Friday evening. Based on Friday’s closing price compared to Thursday’s closing price, the forint was up 11.25 units against the euro, which was an unprecedented one-day gain.

In terms of daily percentage change, the forint has not seen such a big one-day rise since 2 April 2009, when it was 2.7 percent, just like yesterday. Prior to that, there was a 3.06 percent rise on 10 October 2008 and a 3.86 percent rise on 28 October 2008, according to Reuters, during the turbulent first period of the outbreak of the financial crisis.

With this huge advance, the forint is still 48 units weaker than it was at the end of last year, which is a 13 percent fall. In terms of regional currencies, the forint has fallen much more this year than the zloty (4.6 percent) and the Czech koruna, which has managed to strengthen even at much higher interest rates.

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Read also456.3 HUF/EUR already a reality at this Hungarian company!

Government’s euro introduction announcement was just a trick?

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Although Mihály Varga has just announced the possible introduction of the euro in Hungary, in reality, the country’ s economy is not prepared for it. The CEO of GKI Economic Research Co believes Mihály Varga’s announcement only serves the purpose of confusing less sophisticated investors. 

Hungary insisted on keeping the HUF

According to László Molnár, Hungary is much further from the introduction of the euro than at any time in the last ten years. When Hungary had the greatest chance to enter ERM 2 and consider introducing the euro (between 2013 and 2017), the government insisted on keeping the HUF, writes 24.hu. They said that keeping the HUF is the guarantee of an independent economic policy.

Hungary is far from introducing the euro

Now that the economic crisis has reached Hungary, this is also not the right time to introduce the euro. In addition, if a member state is ready to introduce the common European currency, it first has to meet various convergence criteria. Among other criteria are the public budget deficit, inflation and the public debt in proportion to GDP. – reports Pénzcentrum. However, Hungary is having difficulties in these areas.

László Molnár lists the following problems:

  • the national debt nominally doubled compared to 2010 reaching a record level
  • unprecedented deficits appeared in the budget
  • Hungarian inflation data are among the worst in the EU
  • interest rate is also far above the EU average interest rate

Trick: announcing the introduction of the euro can have a strengthening effect on the HUF

The CEO of GKI Economic Research Co believes that Hungary’s external financing is in such a bad situation that announcing a possible introduction of the euro can have a strengthening effect on the HUF. It can be beneficial if the investors get confused by the fact that the government is considering the introduction of the euro. In fact, Mihály Varga, Minister of Finance might be able to deceive those less sophisticated investors who have less than 1 percent of Hungary in their portfolios and who are considering whether to buy HUF-denominated government bonds. Personally, the minister would probably not refrain from introducing the euro, but this is far from the official position of both the government and the Hungarian National Bank.

Potential investors must believe that the HUF exchange rate will strengthen

Due to the high deficit of the current account and the foreign trade balance, extra funds are urgently needed. However, since the state does not want to issue foreign currency bonds, the only solution left is to attract investors to the HUF government bond market. Although the interest rate on HUF government bonds is above 10 percent, the volatility of the HUF is 18 percent within a year, which will take away the interest rate. Therefore, potential investors must believe that the HUF exchange rate will strengthen.

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Hungarian forint suffers another record plunge – How long will this trend last?

forint exchange rate - daily news hungary

On Thursday, the euro was above HUF 433 forints, while the dollar was HUF 448. The forint is at historic lows against all major currencies. Economists and traders also expect inflation to rise. They believe that the war is not the main triggering factor, but the roots of the issue can be found within the country’s borders

Another negative peak

The Hungarian forint has suffered another record plunge. One dollar was HUF 448 on Thursday morning, while the euro was above HUF 433, napi.hu reports.

The forint has been falling throughout the entire week. Each day marks another historic low and another negative record. Experts say further weakening of the forint could be on the way. The next days and weeks could bring new lows.

Read alsoHungarian forint is in a slump again: euro has risen by 30 forints in a month

“The forint continues to weaken. On Wednesday, the exchange rate rose for the seventh day in a row, the first time since September 2020. In fact, it is breaking a record high for the tenth time in the last 11 days. 433 is a psychological level, but there is no substantial resistance at such unprecedented highs. The distance from the 13-day moving average (420.7) is also becoming more significant, also suggesting at least a temporary halt. However, a trend reversal (below 420 levels) is unlikely,” Raiffeisen wrote.

Meanwhile, Magyar Bankholding expected the euro to end the year at HUF 395 in its quarterly report. They based this on the fact that they believed the Hungarian government would reach an agreement with Brussels. The arrival of EU money could strengthen the forint.

How long can the weakening continue?

The Hungarian government explains the weakening of the forint by the war situation and the sanctions imposed by Brussels. However, economists and traders believe that the main triggering factor is not the war, but the roots of the issue can be found within the country’s borders.

Experts reckon that the forint’s plunge could continue. One euro could cost up to HUF 500, rtl.hu reports. Bread prices in Hungary have risen the most in the European Union. Products imported from abroad are already more expensive due to inflation.

According to István Dedák, the forint is likely to weaken to such a level that one euro could be worth HUF 460. “However, it is also possible that if things go well, it will go back below HUF 400,” he added.

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Read alsoNegative prospects for next year: terrible price rises will continue in Hungary

Hungarian forint is in a slump again: euro has risen by 30 forints in a month

There is nothing new under the sun: the forint woke up to a bad day today. The Hungarian currency started Wednesday morning at a historic low. This now means than just within one month, the euro has risen by 30 forints!

The forint weakened against the major currencies on the interbank market early on Wednesday morning compared to Tuesday evening. It reached a historic low against the dollar, MTI reports. The dollar appreciated from 441.27 forints to 442.49 forints. About two hours earlier, it was at a historic high of 443.83 forints.

The euro strengthened to 429.83 forints at 6.30 AM from 429.65 forints on Monday. The Swiss franc rose to 444.15 from 443.31 forints, 24.hu reports.

The forint hit an all-time low against the euro on Tuesday and again against the dollar on Wednesday.

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Read alsoWages in euros: a possible alternative in Hungary?

Wages in euros: a possible alternative in Hungary?

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With rising inflation and a weakening forint, the possibility of using the euro in the Hungarian economy is an increasingly common topic. Understandably, employees would benefit most from getting their wages in euros instead of the ever weakening Hungarian currency. But is it possible in this country?

Since August, corporate tax can be paid not only in forints, but also in euros or US dollars. In what other cases is it possible to pay in foreign currency instead of HUF under the current rules in Hungary? Napi.hu has taken a look at them.

Although it may seem attractive to be paid in euros, this is not possible under the relevant legislation. Your wage must be paid in forints. However, exceptions to this are so-called “managerial employees” and working abroad. Although the law also states that legislation may provide otherwise, there is currently no legislation in force that allows wages to be paid in a currency other than forints in other cases.

For companies, foreign currency transactions and invoicing may also be a reasonable option, napi.hu adds. This is possible under Hungarian law even in relations between Hungarian companies. “However, when accounting in a foreign currency, it is important to keep in mind the financial rules, such as the VAT law,” warns Torsten Braner, head of the Budapest office of Taylor Wessing.

As things stand at the moment, the average employee in Hungary will not get their monthly wages in a foreign currency anytime soon.

Read alsoBreaking News: Hungarian forint is at an all-time low against both the euro and the dollar

Would the euro instead of the forint save the Hungarian economy?

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The Hungarian economy is currently under heavy pressure and there is a fear of its collapse. For a country to go bankrupt, a lot needs to be done. Still, the country’s economy is not doing well. Many hope that a new currency might bring the long-awaited salvation. However, this might not be the case, according to analysts. Amid a crisis, introducing the euro is certainly not a good idea. However, the crisis is not the only problem.

In the current situation of Hungary, the euro’s introduction is still far away. According to the agreement with which Hungary joined the European Union, it must eventually introduce the euro. But even after eighteen years of being a member, this still seems unrealistic. The Hungarian economy is not in a position where such a move would be a good idea. In times like these, even the criteria for introducing the euro are volatile because the markets are so uncertain. This would make it very hard to even think about how to introduce the currency and most likely compromises would be needed.

The near future will not be better

The war will not end according to forecasts even by the same time next year. At least 2-3 years will be needed for a clearer picture, said Péter Virovácz, the lead analyst of the ING Bank, to Index.hu. As long as the economies do not stabilise, we will not be able to see the true state of economies. The analyst also says, that changing the criteria would be a logical move to ensure the fiscal stability of the Union.

During the Covid pandemic, the Hungarian economy saw one of the lowest recessions mostly because of independent monetary politics. Hungary was able to deal with the pandemic on its own, but the energy crisis is too overwhelming. In the first case, independence was a blessing, but now it is a curse. In the past few months, the euro also weakened, so even with it, inflation would be present. But this inflation would be less as it would mostly affect non-euro-based transactions.

Dávid Németh, the lead analyst of the K&H Bank said that Hungary could be worse off with the Euro in the next 20 years. After joining the Eurozone, Hungary would lose its competitiveness for at least 1-2 years. Without widespread discussion, the question of the Euro introduction still remains a mystery. The government must include the largest employers in the discussion to know whether employees would be better or worse off with the euro. If the companies themselves are not able to benefit from the currency change, then no one really will.

Without budgetary discipline, Hungary will not be able to join the Eurozone any time soon. The current situation might put enough pressure on the government to change its spending practices. The euro is not a guarantee for a better economy. For a better answer, we will have to wait for calmer times.

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Hungarian forint sank to new historic low against euro today!

forint exchange rate - daily news hungary

The Hungarian forint has been weakening for days and reached a new historic low against the EU’s common currency today. At a certain point today, one euro cost almost HUF 426. It seems that despite the Hungarian Central Bank’s base point increase last week, the currency exchange rate of the forint cannot be stabilised. Read more in our article below.

Historic low again – buy euro

According to hvg.hu, Hungary’s forint narrowly escaped falling under 426 against the euro this afternoon. At 1 PM, the exchange rate was 425.815, which means a new historic low after Monday’s fall. Since then, forint strengthened to 423.

Wednesday was again not the heyday of the Hungarian currency. It weakened against the dollar and the Swiss franc, as well. In the case of the former, the exchange rate was a bit below 430, while in the case of the latter, it stopped above 436 at 1 PM. However, the day is not over yet and analysts expect further weakening.

The reasons behind the weak forint

Hungary’s forint did not start the day well. Its value fell 1 percent against the EUR already in the morning. The reason behind the negative trend is the expensive energy import and the unbalanced Hungarian state budget. It seems the agreement between Hungary’s biggest electricity supplier, the MVM, and Russia’s Gazprom about a deferred payment of the gas bill did not help. HVG says Hungary would have to balance those bills with interests later. 

Hungarian forint exchange rate
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The other reason is the EU funding Hungary badly needs but the European Commission does not want to transfer due to corruption issues. The European Parliament started a rule of law procedure against Hungary, while the European Commission had an infringement procedure this spring. The Hungarian government expressed it was committed to changing the EU funding distribution system, and some bills had already been submitted to the parliament in that regard. Furthermore, investors did not like that the Hungarian Central Bank announced last week the end of basic rate increases for this year.

The weakening forint is terrible for the Hungarians receiving their salaries in Hungary’s national currency. However, it is good for foreign investors who plan, for example, to buy property in Hungary. For them, the last few months meant a real estate price decrease in Hungary. Probably that is why Dutch, English and German nationals would like to buy houses and apartments in Hungary, mostly in Budapest and around Lake Balaton.

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The Hungarian forint plunges: new record against the euro above 420

forint euro bills

The forint started to weaken even before the market opened, and the weakening accelerated thereafter. The dollar is also strengthening against the euro.

The forint weakened to over 420 against the euro at 11 AM on Thursday. The exchange rate against the dollar weakened to over 435 at the same time, hvg.hu reports.

New historic lows as things stand:

  • Against the euro: 420.4,
  • Against the dollar: 435.15.

Unusually, the forint weakened significantly before the market opened and has continued to do so ever since. It fell from 414 against the euro to 415.8 in about an hour – the historic low was 416.7 before Thursday. Against the dollar, also in an hour, it went from 427.7 to 430.4 – the old historic low was 432.6.

The main reason behind the price movements is certainly the strengthening of the dollar. The US currency has been strengthening since 28 September, and there have also been significant bounces against the euro just as the currencies of the region, the Hungarian forint, the Czech koruna and the Polish zloty, are breaking down.

The forint has been weakening since Tuesday, when the Hungarian National Bank (Magyar Nemzeti Bank, MNB) announced a larger-than-expected interest rate hike and the end of its rate hike cycle. The central bank will continue its monetary tightening with other instruments, focusing on liquidity tightening.

Read alsoThe Hungarian forint’s newest historical low against the dollar

Putin’s announcement sent the Hungarian forint plummeting

forint euro bills

The euro was just below 400 forints, but this miracle did not even last a whole day. On Wednesday afternoon, the exchange rate was back above 405 after it was announced that the Russian reserves would be mobilised.

The forint started to weaken rapidly on Wednesday afternoon. The euro jumped to over 405 forints and the dollar to 409 forints, whereas on Tuesday both currencies were still trading below 400 forints. With the escalation of the war and the repeated rise in world gas prices, the forint has started to weaken again, and we are now above the 50 and 30-day moving averages, napi.hu reports. If today’s trading ends above 401.20, further rises towards the 408-410 levels are expected, Equilor Befektetési Zrt. said.

Read alsoIs the HUF 50,000 banknote coming?

The rise and fall of the Hungarian forint

forint euro bills

The forint started weakening after it emerged that Russian oil is not coming to Hungary. This morning, it seems like it received another blow, after which it decided to strengthen again.

Yesterday morning, the euro was still at 394 forints, but in the afternoon, it went up to 398 forints. The weakening followed the news that the Friendship II pipeline had been shut down. The euro was up to 398.16 forints, the dollar to 389.55 forints and the Swiss franc to 408.08 forints on news of the oil supply cut, writes szeretlekmagyarorszag.hu.

The forint performed very well throughout last week, even falling below 393, but this week has been more mixed so far. Yesterday’s news of the The oil supply shutdown brought a serious weakening, with the forint climbing above 398.

Around half past nine, the forint started to fall again, with the euro jumping from around 397 to 399.5. The dollar rose to 391.3. Across the region, the Czech koruna is stagnant and the Polish zloty has weakened by only 0.2%, reports portfolio.hu.

After it was reported that MOL has paid the transit fee to the Ukrainians and oil transit could start again in a few days, the forint has strengthened. After reaching even 401.3, the forint rallied to near 398 against the euro.

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“Eurosation”: will the euro displace the forint in the Hungarian economy?

It seems like the process of eurosation, the euro spontaneously eclipsing the forint in the Hungarian economy has started. Although there are significant administrative obstacles to this, there are sectors where a possible further weakening of the forint exchange rate represents an unacceptable business risk.

It seems that “eurosation”, the process whereby the euro pushes Hungary’s own currency into the background, has begun. One of the many administrative obstacles of this is that wages cannot be paid in euros. However, there are some sectors where the further weakening of the Hungarian currency represents an unacceptable business risk, napi.hu reports.

The forint plummets, the euro becomes more appealing

As the forint has experienced an unprecedented fall in recent months, some Hungarians prefer the euro instead. The forint has lost more than half of its value since the change of political regime in 2010, Reuters reports. Like its neighbours the Czech Republic, Poland and Romania, Hungary is nowhere near meeting the conditions for adopting the euro. Even the Hungarian government explicitly rules this out.

However, the forint is the region’s most underperforming currency, partly because of the twin deficits (trade and fiscal) and partly because of the rule of law disputes with the EU. As a result, some Hungarians are trying to take the currency problem into their own hands.

Massive weakening

Interest in the euro is boosted by the fact that the Hungarian currency has weakened by eight percent against the euro this year alone. In July, the forint lost four percent of its value in two days.

Since wages cannot be paid in euros under Hungarian law, most companies that wanted to make such a gesture to their employees gave them an extraordinary pay rise of 5-10%. Others pay compensation at the end of the month in line with the forint exchange rate, Reuters quotes lawyer László Szűcs as saying.

Szűcs, a lawyer at Réti, Várszegi & Partners Law Firm PwC Legal, also shared that in the IT sector, where many companies operate independently and there are many orders from abroad, new projects have been contracted exclusively in euros for the last three to four months.

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Firms to have option of paying taxes in euros, US dollars in Hungary

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The government has decided to give companies operating in Hungary the option of paying their corporate and business taxes in forints, euros or US dollars, the finance minister said on Saturday.

The new regulation could help streamline tax administration for businesses that generate some or all of their revenues in foreign currency, Mihály Varga said on Facebook.

The option of paying taxes in euros or dollars will be available to all companies, the minister said. While the change will reduce administrative burdens, tax revenues will keep flowing into the treasury, and the budget balance will remain stable, Varga said.

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