forint

Hungarian forint made a massive move: here is the new record

forint euro bills

The Hungarian forint moved in a narrow range this week. It was unable to break free from the 370 EUR/HUF exchange rate level for long. However, the currency strengthened on Friday afternoon and climbed to a one-year record high.

Just a few days ago, we reported that the Hungarian forint hit a one-year high. On Wednesday, this record was breaking below the 368 EUR/HUF level. On Friday, the forint even went below 367.7, standing exactly at 367.69 at 5:40 PM, Index reports.

Inflation data was kind to the Hungarian forint

The most important factor in the strengthening of the forint was the May inflation data released on Thursday. The data showed that the consumer price index rose by 21.5 percent on an annual basis, while core inflation was 22.8 percent, Zoltán Varga, senior analyst at Equilor, pointed out to the Hungarian news portal.

“There are many positives to be taken from the data. On a monthly basis, food prices have stopped rising, while household energy has fallen by 3 percent as consumption declines,” the expert explained.

He added that the price of services continues to rise, with an increase of 0.9 percent compared to April.

No stopping for the forint even after one-year peak

money hungarian forint budget

The forint was trading at around 368.7 against the euro on Wednesday morning. That is a minimal change from Tuesday evening for the Hungarian currency. The forint strengthened to a one-year high on Tuesday, with the euro trading below 368.

In the coming days, the inflation data due on Thursday morning will be important for the forint. This morning, the preliminary industrial production data was released, which showed a particularly weak performance. This could cast a shadow over the start of the second quarter in the Hungarian economy, Portfolio explains.

Among the forint’s regional rivals, the Polish zloty started the day 0.25 percent weaker and the Czech koruna 0.2 percent weaker. In emerging markets, the Turkish lira is in a market crash this morning, down 5.5 percent against the dollar.

Positive prognosis: Forint will strengthen to 345 EUR/HUF level?

forint euro bills

If the forint manages to break through the critical exchange rate level that it has been besieging for months, it would bring along a significant strengthening of the Hungarian currency.

The domestic currency has strengthened markedly since last October’s very weak performance, when the EUR/HUF exchange rate was 435. Since March, however, the lowest point of the forint was 400 against the euro. In April, the forint reached the important level of 370 and has remained close to it since, not going above 380, napi.hu writes.

The significance of the 370 level is that it had been the weakest level for almost two years after March 2020. It had “held” the exchange rate for several occasions. It thus became a strong support for the forint from a technical point of view. In the months before the war, when gas prices rose sharply as a result of Russian manipulation, it slightly exceeded it, but remained close to it, napi.hu recalls.

The third try of the forint

In April, the forint first moved towards strength, followed by a sharp bounce back to 378. In May, the exchange rate tried again to break the level, holding between 368-370 for several days, but a second sharp bounce ended the attempt again. We wrote about this fall in detail HERE.

eur/huf exchange rate 05 06 2023
The EUR/HUF exchange rate at 9.50 PM on 5 June 2023.

Of course, the outcome is not yet known. However, there is something to note here, is a typical process in technical analysis and is often seen in various liquid, high-turnover assets (stocks, currencies, gold). In cases like this, the exchange rate bounces back three times from the strong level, but the fourth attempt is successful and is usually followed by a very strong further move, napi.hu explains.

If a similar situation were to occur for the forint, i.e. a breakthrough is not possible now, but it is possible next time, the EUR/HUF exchange rate could fall to 345, as this the next important level.

Of course, if a breakthrough is achieved now, there could still be a fair recovery.

Will Hungary ever see the euro as its currency? The governor of the Hungarian central bank talked about this recently, read his stance HERE.

Central Bank governor talks about Hungarian euro introduction date

Hungary central bank governor Matolcsy

György Matolcsy talked about the issue in the public broadcaster Kossuth Rádió yesterday. He said Hungary would have to join the eurozone sooner or later. He added that date will not come before 2030. He highlighted Europe would be successful in the coming decade, and Hungary should not miss that.

Matolcsy said he has a good relationship with Christine Lagarde, the French president of the European Central Bank. He added he sympathises with the president’s work, portfolio.hu wrote.

He said the Americans did not like the idea of the euro in 1999. Therefore, they conducted a secret warfare against it. Therefore, one of the achievements of the common European currency is that it survived the past decades. As a result, the euro has become the second “global currency” behind the USD.

Concerning Hungary’s accession to the eurozone, he said, sooner or later, it will be inevitable. However, the Hungarian central bank believes the the euro introduction would only be favourable when Hungary’s economic development level reached 90 percent of the EU’s average. Otherwise, such a decision would be irresponsible, just like in the case of Slovakia and Greece.

Governor: fiscal balance needed

Hungary may reach that development level by 2030 or a bit later. Then it would be worth it to join the eurozone. He said, during the COVID crisis, the central bank intervened several times and could help the Hungarian economic growth significantly. Without the forint, such successes would not have been possible. He praised the work of the European Central Bank during the COVID pandemic but added Hungary needed the extra only the independent Hungarian monetary policy could provide.

He highlighted the Hungarian government had to reestablish the fiscal balance broken in the last three years. He added that Hungary should be part of every EU development and economic program in the future because Europe will advance successfully in the 2020s.

Budapest mayor: 2024 draft budget would ‘bleed Budapest out’ further

Traffic Budapest Chain Bridge

Next year’s draft budget would “bleed Budapest out” even further, Budapest Mayor Gergely Karácsony said in a Facebook post on Thursday.

Government support for the city would come to HUF 34.5 billion (EUR 9.4bn), up from 33 billion this year, meaning that the real value of the funding would decrease, he said.

At the same time, the solidarity tax imposed on the city would increase from HUF 58 billion to 75 billion, he said.

“This year, the city funded the government with HUF 25 billion; next year, that funding would be over 40 billion,” he said.

That money could ensure the city’s operation for 82 days, he noted.

Meanwhile, the draft budget would also cut funding for “activities and services in localities and communities” by one-fifth, “exposing the lie” that the solidarity tax levelled at cities would help support smaller localities, he said. Environmental protection, social services and railways would also suffer, making the budget “not just anti-Budapest but an anti-municipality one”, he said.

Karácsony called on Budapest residents to give their opinions in an ongoing online survey on the city’s affairs.

“The extraordinary situation warrants extraordinary measures: we will take the government to court. We will prove not only that the anti-Budapest policy is harmful for the country but also that it is unlawful,” he said.

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

forint exchange rate money

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.

Forint continues to strengthen: Sunday will be its black day?

Hungarian forint state budget historic lows

The forint exchange rate against the euro continues to decrease despite the American inflation data and other external effects. But will that trend remain durable? For example, the Turkish elections may result in a plummet next week. At least, that is what experts said before. The forint seems to have become more resistant to external monetary and policy changes.

According to Világgazdaság, despite the USA announcing higher inflation data than expected, the forint continues to rise. The USD strengthened while the euro weakened, but the forint did not follow the European currency. Last year, such exchange rate changes considerably affected the Hungarian national currency.

Furthermore, the Hungarian central bank announced the reversal of the previous interest rate increase program this Tuesday. But the forint was not disturbed by that news even though its exchange rate is protected by the high Hungarian base interest rate (13 percent currently). At the moment, its currency exchange rate against the euro stands at 371.41, even though, on Thursday, it was above 372.

Forint among the favourites of the investors

Interestingly, last year, the Polish zloty and the Czech koruna were the better-performing regional currencies. However, the trend has changed. The Hungarian forint has become one of the favourites of the foreign investors, while the zloty’s and koruna’s currency exchange rates face more risks.

We wrote before about the presidential and parliamentary elections in Türkiye and their effects on the forint. President Erdogan could not win in the first round, but he will probably celebrate his victory this Sunday after the second round. Experts said the extension of the unorthodox Turkish economic policy might affect the forint badly. However, nothing happened after the first round and probably nothing will happen even after the second since the markets already priced that Erdogan will remain in his office.

Important: New forint coin to be introduced today in Hungary!

New forint coin will appear in Hungary

To mark the 175th anniversary of the Hungarian Defence Forces, the Magyar Nemzeti Bank (MNB) is issuing a 100-forint commemorative circulation coin on 23 May 2023. The special coin highlights the symbolic elements of the logo of the Hungarian Defence Forces, commemorating the values and traditions of the historical past and the military history that are still relevant today. The thematic side of the coin was designed by sculptor Zoltán Kovács and will be released in 1 million pieces from the day of issuance.

New forint coin

In addition to the struggle for individual liberties, the Hungarian War of Independence in 1848-1849 also aimed to establish national autonomy. An important step in this process was the establishment of the Hungarian Defence Forces. On 16 May 1848, Lajos Kossuth, the Minister of Defence of the first accountable Hungarian government, published his famous proclamation on the establishment of the Hungarian Defence Battalions, thereby creating the first centrally organised Hungarian army, which celebrates its 175th anniversary this year, mnb.hu wrote.

The main task of the Hungarian Defence Forces is currently to defend the sovereignty and territorial integrity of the country and to strengthen the collective defence of the North Atlantic Treaty Organisation (NATO). Its further tasks include contributing to other allied missions undertaken jointly in partnership and in accordance with international treaties, peace support and humanitarian operations, response to major industrial and natural disasters, and advanced training of allied military and civilian law enforcement forces, including outside the NATO and the European Union.

To mark the 175th anniversary of the Hungarian Defence Forces, the MNB is issuing a 100-forint commemorative circulation coin on 23 May 2023. The issuance coincides with the Day of the Hungarian Defence Forces, which has been observed since 1992 pursuant to a government decree to commemorate the recapture of Buda Castle by the Hungarian Defence Forces on 21 May 1849 after a three-week siege, the climax of the spring campaign in the Hungarian War of Independence.

The face value side of the 100-forint bicolour coin, to be issued, is identical to the face value side of the current circulation coin of the same denomination, but on the thematic side the usual coat of arms design is replaced by motifs representing the core values of the Hungarian Defence Forces and elements from its logo. The coin was designed by sculptor Zoltán Kovács.

Traditional symbols

On the obverse, extending into the outer ring, the central motif features details from the logo of the Hungarian Defence Forces, a turul, a bird of prey, holding the sword of Stephen I of Hungary in its claws, and the shield of the Hungarian Defence Forces, with heraldic stripes indicating the national colours. The visual elements focus attention on historical traditions and the role of the Defence Forces. The turul is the animal totem of the Hungarian mythical traditions, the embodiment of celestial power and the supremacy of the ruler, from which the origins of the Árpád dynasty can be traced. Its extended wings represent its protective role.

The sword is a symbol of power and royalty. Traditionally, Hungarian kings used the sword of St Stephen to wave to the four compass points from the coronation hill, demonstrating their power over the country. The shield of the Hungarian Defence Forces defines national belonging and it is also a symbol of security and defence, referring to the basic task of the Hungarian Defence Forces.

The visual representation of this concept is framed by inscriptions. The inner core of the coin bears the motto of the Hungarian Defence Forces: the inscription ‘A HAZÁÉRT’ (For country) is placed in the outer ring, inside the beaded border. In the upper legend, the lettering ‘MAGYARORSZÁG’ (Hungary) and the words ‘175 éves a MAGYAR HONVÉDSÉG’ (175 years of the Hungarian Defence Forces) are seen with the minting year ‘2023’.

Reverse and obverse

The technical parameters of the coins are identical to those of the 100-forint coins in circulation: the outer ring of the bicolour non-ferrous metal coin was made from an alloy of copper (65%), nickel (15%) and zinc (20%) and the inner core from copper (75%), nickel (4%) and zinc (21%). The outer diameter of the coin is 23.8 mm, with a diameter of 15.3 mm at the junction of the inner and outer sections. The rim is 2.6 mm thick and the coin weighs 8.6 grams and its edge is reeded.

There will be 1 million pieces made of the 100-forint commemorative circulation coins to be issued on the anniversary. The public will be able to familiarise themselves with the new coin in circulation in cash transactions while making everyday purchases. The MNB will not exchange denominations in its retail cash office. From the total number of one million, 12,000 pieces will be available for purchase in a serial numbered decorative packaging as first-day mint (in BU finish), with a sticker showing a unique QR code on the back, in addition to the serial number. Using the MNB’s Money Museum mobile application, the gift-wrapped first-day mint coin can be digitally registered on the MNB’s private blockchain. The new technology offers traceability of the coin’s journey from the first registration onwards in the mobile application.

The new 100-forint commemorative circulation coin will also be available as a collector’s item in a roll of 20 coins.

The gift-wrapped first-day mint of the new 100-forint commemorative circulation coin:

The sale of first day mints and collector rolls starts on 23 May 2023 at the coin shop (Budapest, distr. V, 7 Báthory street) and webshop (https://www.penzvero.hu/) of Hungarian Mint Ltd., the producer and distributor of the coins.

Hungarian central bank’s today decision may give a death blow to the forint – UPDATED

Hungarian forint state budget historic lows

As we wrote earlier, Hungary’s central bank is expected to cut the one-day quick deposit rate to 17 percent from 18 percent. Since the bank’s measure aimed to boost the value of the forint in 2022, a possible reduction may result in a significant forint-weakening.

According to portfolio.hu, the Hungarian forint was moderately strengthening on Monday, so much so that it reached the 374/EUR exchange rate. It is important progress because last week’s second half saw considerable forint devaluation against the EUR and the USD. As a result, the Hungarian national currency could make up for some of the losses it suffered last week.

Today the focus of the investors will be on the central bank’s decisions and their subsequent communication. The market expects the Hungarian National Bank’s monetary council to start an interest rate-cutting period. For instance, Morgan Stanley projected a 100 base points cut. Consequently, the one-day quick deposit rate will fall to 17 percent from 18 percent. However, the base interest rate is not expected to change. On the contrary, it will remain the highest in the region (13 percent).

Central bank decides the future of the forint

That means the government and the central bank agreed to practically freeze the credit market in Hungary. Needless to say, nobody prefers to apply for a loan with such a high-interest rate. As a result, the Hungarian property market froze, and it is unlikely to revive until a significant base interest drop occurs. However, the central bank cannot do that if it wants to protect the forint. Besides, the Orbán administration does not want another forint/EUR peak either, like the one that occurred in autumn 2022 when one EUR cost more than 430 forints.

Currently, forint stands at 374.4/EUR and 346.5/USD. Yesterday was a day of strengthening, so we hope today will bring another boost, following the decisions of the Hungarian national bank. Weak forint only benefits the export as well as those Hungarians who work in Austria or Slovakia where they receive their salaries in euros, but it’s bad news for everyone else. Weaker forint largely contributes to the soaring inflation, which is the highest in Hungary in the EU, exceeding 25 percent. And that is just the tip of the iceberg. The food price inflation, for instance, is much higher, more than 45 percent on average. Many people, therefore, do their weekly grocery shopping in Slovakia, where they can pay with euros. We reported on this new consumer trend HERE.

UPDATE – Big announcement expected from the MNB governor

According to Pénzcentrum, György Matolcsy, the governor of Hungary’s central bank (MNB), will hold today’s press conference about the interest rate modification. The media outlet argues that may mean Matolcsy will share a big announcement. The press conference will start at 3 pm.

Are Hungarians investing more money outside of the country?

euro money chinese loan fine

There is a common claim nowadays that more and more Hungarians are keeping their money abroad, or at least in foreign currency. A new investigation was started to verify if this is true or not.

Official data from the Hungarian National Bank (MNB) confirms that the volume of foreign savings among the Hungarian population increased significantly over the past two years. However, the proportion of these savings remains below 10 percent. The strengthening of the Hungarian forint at the beginning of the year also may have disappointed many, writes Portfolio.

Domestic market

Due to high inflation, there has been a significant reshuffling in the Hungarian savings market in the first quarter of this year. The Hungarian population has shifted their savings from current account deposits and cash towards government securities and investment funds. While more money flowed into these investment accounts, the intensified search for yield has not been enough to preserve the stability of savings.

Foreign markets

We have less information on savings held in foreign currency or abroad. However, it can be observed how much money the population holds in:

  1. foreign bank deposits
  2. foreign bonds
  3. foreign investment funds
  4. foreign currency

In this regard, there has been a significant growth in 2021 and 2022. In the former for investment funds and in the latter for deposits, bonds, and currency.

Last year, a net amount of 531 billion Hungarian forints flowed into foreign deposits, 241 billion into foreign bonds, and 117 billion into foreign currency. At the end of March this year, Hungarian households held 12 percent of their deposits, 4 percent of their bonds, 12 percent of their investment funds, and 7 percent of their cash in foreign currency or abroad. The average across these four categories was 8.6 percent.

Is it worth it?

While these ratios are higher than they were, the first quarter of this year did not prove fruitful. Especially not for those who later plan to use these savings in forint. Contrary to the expectations of many, the forint strengthened. This resulted in a loss of approximately 4.8 percent in the value of savings held in euros between December 31st and March 31st.

The value of foreign deposits decreased by HUF 91.7 billion, bonds by HUF 6.6 billion, foreign investment funds by HUF 13.7 billion, and currencies by HUF 25.8 billion in the first quarter. With the exception of investment funds, these declines can largely be attributed to the strengthening of the forint. This phenomeon seems to have had an impact on currency exchange offices and bank branches as well, as the volume of currency purchases decreased in January and February compared to previous months.

Decisive days: Forint may get a punch next Tuesday after weakening

forint historic lows

After the last period’s strengthening, we almost forgot about the forint’s historic lows in 2022. However, it seems nobody can settle. In the second half of this week, the national currency began to fall following some remarks of the Hungarian foreign minister concerning EU help for Ukraine. Forint may receive a decisive punch tossing it farther down on that slope next Tuesday.

According to Tőzsdefórum, the forint has been at a one-year peak against the euro this week, but by Friday, it weakened a lot. Currently, the exchange rate is at 375/EUR. However, on Tuesday, the Hungarian central bank may introduce some interest rate cuts, which can result in a free fall.

The Hungarian forint is still very vulnerable. Its currency exchange rate is affected not only by global changes but also by domestic economic policy modifications. We wrote about the government’s latest decisions about blocking the payment of EUR 500M for Ukraine. That resulted in a decrease. Furthermore, the USD started to strengthen again, so the USD/HUF rate is around 350.

The meeting of central bank governor György Matolcsy and finance minister Mihály Varga, allegedly adversaries in the issue, helped since they agreed to cooperate.

Forint in trouble

However, investors focus on next Tuesday’s central bank monetary council decisions. According to the expectations of Morgan Stanley, the National Bank of Hungary will cut 100 base points. As a result, the one-day quick deposit rate may decrease to 17 percent (it stands now at 18 percent). The new one would still be the highest in the region but can mean a capital withdrawal and a forint exchange rate fall.

Barnabás Virág, the central bank’s deputy governor, said the base interest rate and the one-day quick deposit rate would meet in autumn at the earliest (13 percent). High interest rates are attractive for investors to keep their money in forint, which helps increase the national currency’s value.

Important meeting helped forint

Hungarian forint

Cooperation between the government and the central bank will contribute to inflation falling into the single digits by the end of the year, lower interest rates, improving economic indicators and the return of robust growth, the finance ministry said in a statement on Friday after another meeting between Finance Minister Mihaly Varga and National Bank of Hungary (NBH) governor György Matolcsy.

The Hungarian forintstarted to fall yesterday following Foreign Minister Péter Szijjártó’s Wednesday remarks about a possible Hungarian block concerning EUR 500 million in EU financial assistance to Ukraine. Moreover, Hungary will not support further sanctions against Russia. The currency exchange rate was at almost 380 yesterday afternoon (we wrote about that HERE). Thankfully, the Hungarian central bank’s governor and finance minister Mihály Varga met yesterday, and the forint began to increase again. Now it stands at 375. However, that is higher than its average rate these weeks (368-370/EUR), and the events clearly show how vulnerable the forint is.

The talks between the two leaders focused on next year’s budget, which the ministry said would guarantee Hungary’s security, protect families, pensions and jobs, as well as the cap on household utility bills. Varga and Matolcsy were in agreement that disciplined policies and the reduction of the budget deficit and the public debt could put the country’s economic growth back on track next year, the Hungarian News Agency (MTI) wrote.

Accordingly, next year’s budget targets a deficit of less than 3 percent of GDP and aims to reduce the public debt-to-GDP ratio below 67 percent. It assumes a GDP growth rate of “around 4 percent”, the statement said. The government and the central bank aim to push inflation into the single digits by the end of the year, reduce interest rates and protect the economy from recession, the ministry said. Varga and Matolcsy last met in April, when they agreed to hold consultations on strategic matters on a regular basis.

No stopping: Hungarian forint at a new low

forint exchange rate money

The Hungarian forint ended Thursday’s session with a significant weakening against the euro. Friday did not start well either: we soon saw another multi-week low for the forint.

Yesterday, we wrote about the inevitable weakening of the Hungarian currency. Just like clockwork, the forint started weakening not long after we published our article. There has been no stopping ever since then: at the time of writing of this article, the EUR/HUF exchange rate stands at 378.46.

This means that the forint is almost one percent weaker compared to last night alone. According to Portfolio, there are several reasons for this:

  • First of all, the dollar strengthened yesterday as expectations of a Fed interest rate hike strengthened again.
  • The Hungarian currency was supported by the 370 level. It was unable to fall significantly below it.
  • Some investors may close their positions out of caution ahead of Tuesday’s interest rate decision.

When the EUR/HUF exchange rate reached 377.85, it was already clear that

we haven’t seen such a low for the Hungarian forint since 26 April.

Expert: The forint will inevitably weaken soon, 400 EUR/HUF level expected again

István Al-Hilal, the CEE regional leader of Fidelity International, talked about the future of the Hungarian national currency in an online professional event organised by OTP Private Banking. He suggested the Hungarian forint will remain “strong” until the central bank keeps the base interest rate high. However, the bank cannot hold that this high forever. Therefore, a weakening is inevitable soon.

As we wrote before, the Hungarian forint is among the most popular currencies among foreign investors. That is because its exchange rate against the euro and the USD decreased significantly in the last few months. The end of 2022 was a period of historic lows against the main foreign currencies. For example, the euro broke even the psychological barrier of 430.

However, the central bank intervened and raised the base interest rate considerably. Furthermore, some good news started to come about, releasing at least some of the frozen EU development and RRF money. Even though there is no significant approach in the latter issue, the investors seem to have priced the Hungarian economy policy and the forint. Therefore, the exchange rate started to get better this January, and now it stands around 370/EUR.

We wrote HERE about the consequences of the Turkish elections on the national currencies of the different emerging countries, including the forint. Last Sunday’s elections did not decide Erdogan’s fate. There will be a second round on 28 May. But it seems that kind of uncertainty did not shake the forint. Experts thought it would because the forint is vulnerable to a global crisis. And a change in Türkiye (or the continuation of Erdogan’s unorthodox economic policies) would certainly trigger one.

Forint will start weakening after a base interest rate cut

Mr Al-Hilal said at OTP Private Banking’s conference that the Hungarian central bank introduced a very high base interest rate last year to help the forint. He highlighted it is very high compared to the developed markets and the CEE region. He added that when the Hungarian economy’s fundaments were better, the government kept forint value low, due to economic reasons. Portfolio does not mention those, but we think about boosting foreign trade and increasing Hungary’s competitiveness among the possible investors.

Now the economy’s fundaments are worse, so the result would be a weaker forint. However, that is also disadvantageous politically. Therefore, the central bank raised the base interest rate. But there should be a rate cut soon. Afterwards, Mr Al-Hilal believes the forint will weaken back to 400/EUR. Provided the central bank does not cut the base interest, rate the Hungarian economy will be in a recession. We wrote HERE that the property market in Hungary is frozen party because of the high interest rates resulting from the high base interest rate.

István Al-Hilal believes the central bank will carry out significant cuts soon. He also reminded the amount of state bond owned by foreigners, peaked at a historic high, being above HUF 7,000 billion (EUR 18.77 billion).

We wrote in THIS article about some bank cards in Hungary you should be careful with.

Watch out in Hungary if you use these bank cards

There are many domestic banks in Hungary that both locals and foreigners can choose from. The spread of internet banks such as Revolut or Wise, however, is sometimes forcing them into the shadow. With the international bank cards these 21st-century financial companies offer, we can pay virtually anywhere. In addition to these services, of course, we can also utilise the good old ATMs. 

It is important to note though, that it can widely differ how domestic banks process these cards. Recently in Hungary, a significant change has taken place regarding this matter. The Hungarian branch of the Austrian Erste Bank has introduced new fees and restrictions. The new measures particularly affect people with foreign bank accounts, writes Bankmonitor.

Withdrawal fee

When using the ATMs of Erste Bank, you will now have to pay an extra 1,200 HUF (EUR 3.2) whenever you aim to withdraw cash. This is a flat fee, it won’t change regardless of the amount. This will be implemented even in cases when according to the package provided by the foreign bank, the withdrawal should be free.

This is not necessarily a surprise. Financial institutions can decide for themselves what kind of fees they set when customers initiate withdrawal with foreign cards. However, those who have been using Erste ATMs should watch out from now on. The good news is the machine will inform you about this recent measure and will ask you if you want to proceed with the withdrawal with this change in mind.

Another change concerns the amount of money that can be withdrawn from the account linked to the card. From now on one can only withdraw a maximum of HUF 150.000 (EUR 400) from Erste’s machines per day with foreign cards. This does not concern only one ATM, but all of them that belong to Erste.

Currency exchange

You should also be mindful about using Erste’s machines if you are withdrawing HUF from an account with foreign currency denomination as the Austria-based bank recently introduced the system of Dynamic Currency Exchange.

This means that upon withdrawing Hungarian forint with an international bank card, the ATM will ask you if you prefer to use the currency exchange rate of Erste, or that of your card provider. It is more advisable to opt for your own bank, as they probably give you a better offer than the domestic bank. You can avoid this step if you convert your currency to HUF in the bank’s application before using your card.

Forint weakening may start today

Hungarian forint state budget historic lows

The Hungarian forint has been strengthening for months after the historic lows against the euro and USD last year-end when the exchange rate even exceeded the psychological barrier of 430/EUR. Will those days return next week?

As we wrote yesterday, the Hungarian forint has become one of the foreign investors’ favourite currencies. It can be explained by the forint’s significant strengthening since end-2022. The currency exchange rate stands around 370/EUR, an annual record. And the Bank of America expects the forint to continue to move on that track. By the end-2024, they project a 360/EUR exchange rate.

However, they also admitted in their most recent analysis that the forint is still among the most vulnerable currencies. The American bank crisis early this year also took a heavy toll on forint. Despite the previous strengthening trend and the high interest rates the central bank introduced to protect the national currency, the forint started to fall as a result of the bad news.

The Turkish elections may have a significant effect on the forint

Let’s examine what today’s presidential and parliamentary elections in Türkiye may bring to us. According to portfolio.hu, the most pressing question is whether Erdogan retains his presidency and majority in the parliament or loses one or both. The opposition is united in Türkiye, but the inflation is skyrocketing, the economy is under central control, and the Turkish lira lost 95 percent of its value in the last 1.5 years. Thus, economic prospects are gloomy. However, uncertainty is a more considerable problem. Pollsters say the two presidential candidates have 50-50 percent, so it might occur there will be a second round on 28 May, increasing uncertainties.

Regardless of the results, there will be significant changes in the currency exchange markets today. Since the forint is vulnerable, any changes initiated by the Turkish elections may affect it seriously. And recovery can be a long and challenging process. Portfolio.hu argues that markets prefer Erdogan to leave, which could mark liberal economic reforms, the strengthening of the Turkish lira and the return of foreign capital previously impeded by Erdogan’s unorthodox policies.

Bank of America: Forint is very popular, one of the investors’ favourites

Hungarian forint

The Bank of America published its latest report on the most popular currencies of the globe’s emerging markets. Hungary’s national currency was also listed among them. According to bank, those who invest in Hungary’s forint may realise a double-digit percent profit.

Világgazdaság, a Hungarian economy news daily, analysed the latest report of the Bank of America. They said that the BofA mentioned the forint among the currently favoured currencies by investors even though the future of the Hungarian national currency is still shaky.

This week saw forint strengthening again. The currency exchange rate against the euro dropped below 370/EUR, a psychological barrier, multiple times. Considering that a couple of months ago, forint reached historic lows against the euro (and the USD) being even above 430/EUR, that is a remarkable victory.

A strategist of the BofA, David Hauner, mentioned five popular emerging market currencies: the Brazilian real, the Hungarian forint, the Indonesian rupiah, the Thai baht and the South African rand. He calculated with a 12 percent yield in USD. In some cases, that may reach 20 percent. Furthermore, the Bank of America projects a 360/EUR exchange rate by end-2024. The forint used to stand at that level in the end of 2021 and early 2022.

Hungarians do not trust forint

Based on the bank’s model, forint is exceptionally vulnerable to global crises. However, they think investors should buy forint instead of Polish zloty. They added that all emerging markets need a weak dollar to strengthen their currencies. In the past year, the USD decreased by 5 percent against the euro, which helped Poland, Romania, Hungary and other emerging European markets.

We reported on it HERE that Hungarians still do not trust the forint. They buy outstanding amount of foreign currency.

Hungarians still don’t trust the forint: they buy outstanding amounts of foreign currency

forint euro bills

EU-record Hungarian inflation led to a surge in people buying foreign currency at the beginning of the year. Hungarians took advantage of the strengthening forint to buy large amounts of currency in the first months of 2023.

Huge amounts of foreign currency

Taking advantage of the strengthening of the forint at the beginning of the year, Hungarians made large purchases of foreign currency, writes BiztosDöntés.hu based on data from the National Bank of Hungary (MNB). According to the central bank’s statistics, people bought HUF 48.7 billion worth of euros and HUF 11 billion worth of dollars from currency exchanges in the first two months of the year.

Experts haven’t seen this since 2015

Such a strong start to the year has not been seen since 2015. 30 percent more euros and nearly three-quarters more dollars were sold in January and February this year than in the same period in 2022, said Péter Gergely, the site’s financial expert. According to statistics recorded by the central bank since 2010, January’s HUF 28 billion of euro withdrawals is the fifth highest figure, he said.

A good way to fight inflation

According to Péter Gergely, the heightened interest in currency purchases may be due not only to the strengthening of the forint, but also to the fact that inflation in euro is significantly lower. Thus, many people may think that they would rather keep their savings in euro than lose a quarter of their purchasing value in forint in a year.

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