forint

Hungarian forint fell sharply in the last few days, but today there is hope

forint exchange rate - daily news hungary

The euro was at 388.29 Hungarian forints yesterday evening at 6pm, up from 386.24 forints early in the morning, while the dollar was at 360.61 forints, up from 358.88 forints, and the Swiss franc was at 413.07 forints, up from 412.69 forints.

At Wednesday evening’s close, the forint was 1.3 percent weaker against the euro, 3.8 percent weaker against the dollar and 0.1 percent weaker against the Swiss franc than at the start of the year.

After falling on Monday, the Hungarian forint started to fall again on Wednesday morning, intensifying on news that the European Commission has launched infringement proceedings against Hungary over its sovereignty protection law. Details here: EC to launch infringement procedure against Hungary. By early afternoon, the euro had jumped to 389 and the dollar to 361, and we were close to a new multi-month low for the forint in both currency pairs.

Thursday morning

There were some minor fluctuations in the forint on Thursday morning, but there is no clear direction of trading for now, with the euro at around 388 Hungarian forints, as it was yesterday evening.

There will be no foreseeable event today that will have a significant market-moving force, with both domestic and international economic calendars empty, portfolio writes.

Forint and zloty

It points out that exchange rate movements against our regional currency pair, the Polish zloty, could plunge to a new historic low, with a slightly weaker exchange rate than the current level only seen in the second half of 2022.

Will the Hungarian National Bank withdraw the lowest forint coins because it is no longer worth producing them? Will they introduce HUF 50,000 and 100,000 banknotes due to the high inflation? Here are the answers.

EC to launch infringement procedure against Hungary: forint starts to plummet

Hungary European Commission infringement

The European Commission has sent a letter of formal notice to Hungary, launching an infringement procedure over the country’s Sovereignty Protection Act. As a result, the Hungarian forint started to fall again.

Last week saw a significant forint strengthening following the central bank’s surprising decision concerning the lowering of the base rate. We wrote about that in THIS article. However, it seems the trend turned upside down this week following the announcement of the EC about a new infringement procedure. Now the forint-euro exchange rate stands above 388.

In a press release on the February infringement package, the EC said the law, adopted on Dec 12 and in force since Dec 22, 2023, breached EU law.

The statement noted that the law established the Sovereignty Protection Office, “tasked with investigating specific activities carried out in the interest of another State or a foreign body, organisation or natural person, if they are likely to violate or jeopardise the sovereignty of Hungary; and organisations whose activities using foreign funding may influence the outcome of elections or the will of voters.”

Further, the law contains provisions and amendments to already existing legislation “that prohibit candidates, political parties and associations participating in elections from using foreign funding to influence or attempt to influence the will of voters for the elections in question, and to punish under criminal law the use of foreign funding in the context of elections,” the EC said.

In violation of several EU laws

After a “thorough assessment”, the EC said it found the law to be in violation of several EU laws, “among others the democratic values of the Union; the principle of democracy and the electoral rights of EU citizens; several fundamental rights enshrined in the EU Charter of Fundamental Rights, such as the right to respect for private and family life, the right to protection of personal data, the freedom of expression and information, the freedom of association, the electoral rights of EU citizens, the right to an effective remedy and to a fair trial, the privilege against self-incrimination and the legal professional privilege; the requirements of EU law relating to data protection and several rules applicable to the internal market.”

Hungary has two months to reply to the letter of formal notice. Should it not address the issues listed in the letter, the EC may step up the procedure by sending a reasoned opinion.

Hungarian government: sovereignty law ‘under attack’ because it aims to prevent foreign influence

Brussels “and the owners of the dollar left are attacking” Hungary’s Sovereignty Protection Act because it is aimed at preventing foreign influence in Hungary’s affairs “via the Soros-affiliated rolling dollars”, the state secretary for international communication and relations said on Wednesday.

The European Commission on Wednesday sent a letter of formal notice to Hungary, launching an infringement procedure over the Sovereignty Protection Act, saying it breached EU law.

Zoltán Kovács said in a post on Facebook that it was a “fact” that “the dollar left’s top contributor” in the 2022 general election campaign had been US financier George Soros.

He noted that the Sovereignty Protection Act criminalises the acceptance of foreign campaign donations.

The state secretary said the government was standing by the law, as 98 percent of the respondents to the last National Consultation public survey had expressed agreement with the legislation.

In a statement, ruling Fidesz said “we are not even surprised” that “Brussels does not like it that the Sovereignty Protection Act has criminalised the acceptance of foreign campaign financing”.

Hungarian left accepted dollars, euros

“The [Hungarian] left took the unprecedented step in the spring of 2022 of accepting dollars, euros and pounds from abroad for their [general election] campaign and it is not known ever since what they had promised in exchange,” the party said.

“It is political corruption, foreign influence in Hungarian elections and an unlawful attack on Hungary’s sovereignty,” it said.

The party reiterated its position of calling for tightening the rules on attempted foreign influence, asserting that “only the Hungarian people are entitled to decide about Hungary’s future”.

Read also:

  • EU infringement procedure against Bulgaria will start due to Hungary? – Read more HERE
  • Hungarian leftist opposition supports infringement of the rights of Hungarian students, researchers and professors?

5 and 10 forints coins will be withdrawn, HUF 50-100,000 banknotes will be issued in Hungary?

New forint coin will appear in Hungary

Will the Hungarian National Bank withdraw the lowest forint coins because it is no longer worth producing them? Will they introduce HUF 50,000 and 100,000 banknotes due to the high inflation? Here are the answers.

2008 marked a change concerning the history of the Hungarian national currency, the forint. The National Bank of Hungary (MNB) decided to withdraw the lowest coins from circulation. As a result, you could no longer use the 1 and 2-forint coins from 1 March 2008. Pénzcentrum now asked the national bank whether that will happen with the 5 and 10-forint coins as 16 years have passed since that withdrawal, and inflation hit Hungary hard in the pas few months.

The national bank decided 16 years ago to withdraw the lowest forint coins because it was no longer worth producing them. The production costs reached 2-6 forints then. Furthermore, the national bank decided to change the 200-forint banknotes to coins because of the inflation in 2008. The measure was implemented on 15 November 2009.

Hungary saw an incredibly high inflation rate in 2022-2023. For months, inflation in the country was the highest in the European Union. For example, in the case of several food products, the annual inflation reached even 100%.

Read also:

  • Central bank’s surprising decision: forint starts to strengthen – Read more HERE
  • When will Hungary introduce the euro and what effect will it possibly have? – Details in THIS article

New 50,000 and 100,000-forint banknotes on the horizon?

In 2008, the national bank withdrew coins because they were no longer in everyday use. People got them after shopping but did not use them because they could not buy anything with them. Therefore, the national bank had to produce 1 million pieces to substitute them each day.

Now, however, the national bank’s data show Hungarians use the 5 and 10-forints coins in the shopping process. Therefore, they do not plan to withdraw them from circulation.

Interestingly, the national bank told Pénzcentrum that they spent HUF 7.4 billion (EUR 19.27 million) on producing paper money and HUF 4.3 billion (EUR 11.2 million) on making coins.

Based on the IMF’s so-called D-metric method, 5 forint-coins could have been withdrawn from circulation, but the national bank does not want to do so. However, also based on the recommendations of the IMF, the national bank could introduce HUF 50,000 and even HUF 100,000 banknotes because of the high inflation in the last few years. Due to security and political reasons, however, they will probably not do so.

Has PM Orbán given up on adopting the euro in Hungary?

PM Orbán

PM Orbán’s firm stance against euro adoption sparks debate among economists, arguing over its impact on growth, development, and Hungary’s economic stability.

PM Orbán: Adopting the euro is not relevant

As Telex writes, PM Orbán’s government has consistently resisted adopting the euro, frequently deferring the topic by stating it is irrelevant. This stance was echoed in 2022 by Márton Nagy, then a parliamentary nominee and now Finance Minister, who characterised the euro’s introduction as a long-term consideration, given Hungary’s economic readiness.

Recently, PM Orbán reinforced this position, arguing that adopting the euro would stifle growth and limit development, a sentiment aligning with György Matolcsy, Hungary’s central bank governor. Matolcsy previously highlighted the importance of the national currency in fostering economic stability and suggested euro adoption might only occur around 2030, pending mutual agreement between Hungary and the European Commission. During a recent press conference, PM Orbán said:

In my mind, joining the eurozone is not among the possible means of stabilisation.

PM Orbán
Photo: Facebook / Orbán Viktor

Later, the Prime Minister further explained his stance:

Joining the eurozone will undoubtedly bring stability, but it will stifle growth and take away the opportunity for development. I think in terms of this duality, which is why I propose to Hungary that it should retain the possibility of faster development, and for this we need a national currency, and not stabilise the national currency through the eurozone.

What do the economists think?

Economists remain divided on PM Orbán’s assertion that the euro constrains growth and development. Dániel Móricz of HOLD Fund Management acknowledges the flexibility an independent currency provides, particularly in responding to economic shocks through devaluation. According to him, this can restore competitiveness and soften the impact of crises, unlike eurozone nations like Greece, which faced prolonged stagnation due to the inability to devalue their currency. However, he warns that domestic currencies can also amplify risks when economic policies are poorly managed, as seen in Hungary’s 2022 fiscal and monetary challenges, leading to a sharp devaluation of the forint.

forint euro money average wage
Source: depositphotos.com

Economist Dóra Győrffy counters that the euro has not hindered growth in Baltic states, which outperform Hungary in many areas. She argues that reliance on a weak forint to maintain competitiveness traps Hungary in low-wage development. This perpetuates the middle-income trap and stifles progress toward higher-value production. Viktor Zsiday, another investment expert, critiques Hungary’s historical mismanagement of the forint, noting its prolonged weakening and increased public preference for euros. Zsiday suggests euro adoption may ultimately impose fiscal discipline and restore stability if Hungary cannot responsibly manage its national currency.

Read also:

Central bank’s surprising decision: forint starts to strengthen – UPDATED

Hungarian forint state budget historic lows

Hungarian central bank (Magyar Nemzeti Bank, MNB) rate-setters cut the base rate by 75 basis points, to 10.00%, at a regular policy meeting on Tuesday.

According to economx.hu, the cut was lower than the market expected. Experts believed the cut would reach 100 basis points.

In December, the national bank talked about a 100-basis-point cut for January.

According to portfolio.hu, the forint struggled on Monday because the EU heads threatened Hungary with new economic sanctions provided PM Orbán does not vote for Ukraine’s financial aid. As a result, the forint hit the 390/EUR level. That has been unprecedented since last autumn.

Since the monetary council of the national bank did not accelerate the pace of the base rate cut, the forint started to strengthen after the MNB’s announcement.

Thanks to the lower base rate cut, the forint strengthened to 387/EUR in the afternoon. This morning, the Hungarian national currency opened the day at 389.4/EUR.

Read also:

  • Hungarian forint has fallen to a low we have not seen for months – Read more HERE
  • Transparency International’s shocking finding about corruption in Hungary – Details in THIS article

UPDATE: Thanks to the lower base rate cut and the good news concerning the EU summit and a possible Hungary-European Council agreement about the Ukraine aid in Brussels, the forint went below 384/EUR by Wednesday evening.

Disinflation is expected to continue

The Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 9.00 percent and the O/N collateralised loan rate to 11.00 percent.

In a statement released after the meeting, the Council said the country’s risk perception continued to improve “despite a volatile global sentiment”, allowing the base rate to continue to be lowered.

They said Hungary’s risk perception improved further despite a “volatile global sentiment” thanks to “the trend-like improvement” in the country’s current account balance, and the current account balance-to-GDP ratio improved by more than 8 percentage points in 2023.

The Council said “the utilisation of new export capacities built recently and the improving global economic environment” were expected to give new impetus to exports in the coming years. The inflow of EU funds, they added, would contribute to boosting Hungary’s net lending and an increase in central bank foreign exchange reserves.

Disinflation is expected to continue in the first quarter and inflation “is likely to approach the upper bound of the tolerance band in the spring months”, the Council said.

“In the coming months, decisions on any further reductions in the base rate and their optimal pace will be made on the basis of this information, in a data-driven manner,” they added.

At a press conference after the meeting, deputy bank governor Barnabas Virag said improvements in macroeconomic fundamentals could have allowed a bigger cut, but said “noise” on money markets that started a week ago Monday had justified the 75 basis point option.

PM Orbán: Brussels blackmails EU members if they diverge on war, migration, gender

Prime Minister Viktor Orbán has told French weekly Le Point that Hungary offered to compromise regarding the financing of Ukraine but this was not well received, and member states that diverged from the EU on the issues of war, migration and gender, were blackmailed by “imperialist Brussels”. In the interview published on Tuesday, Orbán said Hungary maintained its stance that no military solution to the war in Ukraine was foreseeable and a ceasefire and peace talks were necessary.

Other EU member states, however, tended towards a military solution and recommended the EU hand over 50 billion euros to Ukraine over four years, he added.

Sovereign Hungary, he said, opposed the related budget amendment, yet the other member states did not recognise this sovereign right, and were attempting to put pressure on the government and blackmail it into supporting the financing package.

Hungary, Orbán added, was prepared to sign up to the deal if member states could decide unanimously each year whether or not to continue sending the money to Ukraine.

This was not about blackmailing the bloc with its veto but about restoring and maintaining EU unity, he said.

Asked about how Hungary’s position had been received, Orbán said: “If I understand correctly, the Financial Times published … the response, which was hardly positive.”

Orbán: EU becoming increasingly imperialist

The prime minister said the reaction in Brussels to Hungary acting like a sovereign country was to mount a massive financial blockade and link the Ukraine issue to the rule of law, “even though they have nothing to do with each other”.

Put to him that a senior European Council official had dismissed the Financial Times information, Orbán said: “We’re not just out of kindergarten”. If the document published in the FT describes a financial blockade against Hungary in detail, “such a scenario exists for sure”, he said.

Orbán accused the EU of becoming increasingly imperialist rather than “a community of sovereign states”, and he charged the European Commission with waging an ideological war against Hungary. Its complaints about Hungarian migration and gender policies have nothing to do with corruption or the quality of justice, he added.

“It’s clear that the real bone of contention with Hungary isn’t the rule of law.”

Hungary will lose its voting right?

Stripping Hungary of its vote in the European Council would be possible only in the case of a rule-of-law violation, he said, adding that Ukraine was an unrelated issue.

Orbán said European institutions did not take the rule of law seriously but used it as a tool to blackmail countries that wanted to preserve their sovereignty and hold their own opinions.

He said the argument of other EU member states that annual financing would prevent Ukraine from planning its spending over four years could be taken seriously but was “unacceptable”.

It is hard to predict what would happen in the next few months “let alone in another four years”, he said, adding that it was unknown what the US role would be after the November presidential election.

Europe needs Trump

Referring to the upcoming European Parliament elections, Orbán said the opinion of Europeans would be bypassed if a decision on funding for Ukraine were made today. The 50 billion euros in question would be “very useful for the people of Europe”, he said, adding that the continent was “increasingly suffering due to the poor performance of the economy”.

Asked about Donald Trump’s re-election prospects, Orbán noted that he had said in 2016 that Europe needed Trump since it was usual in international politics that the basis of decision-making was the national interest.

Even without the war, “Ukraine is a serious problem for Europe”, he said, arguing that closer ties with the EU, or even its accession, could have “a catastrophic effect” on European economies, especially its agriculture.

Hungarian forint has fallen to a low we have not seen for months

The Hungarian forint has shown a sharp weakening, finally hitting lows seen months ago today.

As we reported, according to a Financial Times article on Sunday, the European Union has drawn up a plan if Hungary continues to block the adoption of an aid package for Ukraine. Read the our article here – Brussels’ final warning to PM Orbán: Hungarian economy at risk if he vetoes

This is certainly the reason for Monday’s weakening of the forint, but it is also important to clarify that the Hungarian currency has been weakening against the euro since 8 January, and against the dollar since 10 January. This means that over the past 20 days, it has weakened by 15-20 forints against the two major currencies.

The last time the euro-for-sterling exchange rate was above 390 was in early October last year, so the forint is at a near 4-month low. Indeed, the Hungarian currency is now below 390, but it has been above it around noon.

  • The euro was at 389.46 forints at 6:00 pm, down from 388.14 forints early this morning.
  • The dollar rose to 360.42 forints from 358.06 forints
  • The Swiss franc rose to 417.10 forints from 414.51.

Compared to the start of the year, the forint is 1.6 percent weaker against the euro, 3.8 percent weaker against the dollar and 1.1 percent weaker against the Swiss franc, 24.hu said.

read also:

And how long will the fall last?

A crucial EU summit is due to take place on Thursday, and with several members of the Hungarian government indicating that they will not give in to pressure from Brussels, the fall in the Hungarian currency could continue.

The Hungarian government has always tried to extract some concessions from the EU by blocking money for Ukraine and vetoing dozens more, and on Thursday we will see whether Orbán’s veto will work or whether EU leaders will tire of this kind of game-playing.

BUX closes down 1.4 pc

The Budapest BUX share index closed Monday down 1.4 percent at 63,193 points, with bourse turnover of 12.4 billion forints (EUR 32m).

Hungarian forint the weakest this year; decline may continue due to national bank decisions

Hungarian forint national bank central bank governor Matolcsy historic lows

The Hungarian forint was the weakest this week in January, but more decline may come because of the Orbán cabinet’s policy changes.

Forint may continue to decline

The Hungarian forint reached its lowest this week in 2024 because of two main reasons. One is the fall of the regional currencies, while the other is that the markets started to price a future considerable base rate cut that can reach even 100 base points.

The forint started this week from a 382/EUR level, dropping to 388/EUR on Wednesday and Friday. That marks a three-month low. One of the minor reasons was that the government modified the rules concerning the excess profit taxes of the Hungarian pharmaceutical companies. Later, the finance minister and Richter both said the market misunderstood the new rules, but that could not ease the struggle of the Hungarian national currency.

Next Tuesday and Wednesday may decide about the future of the forint. On Tuesday, the Hungarian National Bank is expected to cut the base rate by 100 points. On Wednesday, the US Federal Reserve will decide about the base rate, which will also affect the Hungarian currency – index.hu wrote.

Meanwhile, Mihály Varga, Hungary’s finance minister, said that “the time has come for yields and the base rate to decline.” That may result in the forint’s ongoing depreciation.

Read also:

  • The Hungarian forint has reached a new low – Read more HERE
  • Hungary to honour Nobel Laureates Karikó, Krausz with commemorative coins

Orbán cabinet: strict fiscal policy needed further to push inflation below 5%

The government’s strict fiscal policy should be continued to push average annual inflation below 5 percent, the finance minister told a conference on Saturday.
In his speech at the iCon economic policy conference in Sopron, in north-west Hungary, Mihaly Varga said that inflation fell to 5.5 percent in December from 25.7 percent in January. The trend is expected to continue this month, he added.

In monetary policy, “the time has come for yields and the base rate to decline.” The government also aims to bring deficit down from 6 percent to 3 percent, possibly over 2 years to avoid adverse consequences on growth and unemployment, he said. This year, deficit is expected to be in the 4-4.5 percent range, he added.

Meanwhile, EU funds worth some 520 billion forints (EUR 134.5m) have been disbursed to Hungary since December, the ministry cited Varga as saying. The government is expecting another 2,500 billion forints in 2024, he added.

The Hungarian forint has reached a new low

forint euro kató alpár fotó

The Hungarian forint experienced a further decline on Tuesday morning, marking a new low for the currency in 2024.

Zoltán Varga, a senior analyst at Equilor Befektetési Plc, expressed his belief that the depreciation of the forint exchange rate is not yet over.

During Tuesday morning trading, the forint weakened once again, reaching a rate of 385 against the euro. This is the lowest level recorded since December 2023, indicating that the Hungarian currency has hit its lowest point this year. Additionally, Varga noted that the Polish zloty is also experiencing a similar decline in value alongside the forint.

“In addition, yesterday’s suggestion by the Ministry of National Economy that the benchmark for lending rates should be switched from BUBOR to DKJ yields could also contribute to the weakening of the forint. We have already received a warning from Standard & Poor’s, stating that this move could undermine investor confidence,” said Zoltán Varga.

Read also:

The Equilor analyst added that we have not reached the bottom yet. According to the expert, the interest rate decision meeting of the European Central Bank on Thursday afternoon will be a key event to watch for this week. Even though interest rates are not expected to change, investors are eagerly awaiting any messages from Christine Lagarde, Varga explained. He also mentioned the contradictory statements made by central bankers in recent weeks regarding the optimal timing for initiating a rate-cutting cycle. Therefore, it is crucial to understand the views of the central bank governor and the official position on this matter, index.hu writes.

“If the price were to cross the 385 level later on, the 387-390 range could be realistic, but negative corrections could occur in the meantime,” the expert said. He added that such a rate hike is not expected to influence the MNB’s decision, as it mainly takes inflation into account.

The analyst also mentioned the upcoming release of the US fourth quarter preliminary GDP data on Thursday and the December domestic unemployment rate on Friday morning, which could further influence the exchange rate this week

Hungary to honour Nobel Laureates Karikó, Krausz with commemorative coins

New forint coin will appear in Hungary

The National Bank of Hungary (NBH) will honour the 2023 Nobel Laureates Katalin Karikó and Ferenc Krausz with commemorative coins, the central bank said on Monday, unveiling its 2024 collector coin issuance.

The oval coins, part of the “Nobel Prize Winners of Hungarian Descent” collector series, will be issued in June with face values of 3,000 (EUR 7.8) and 7,500 forints.

Professor Karikó and her research partner Professor Drew Weissman shared the 2023 Nobel Prize in Physiology or Medicine for discoveries that enabled the development of effective mRNA vaccines against COVID-19.

Read also:

Professor Dr Krausz was the joint winner, together with his French colleagues Emeritus Professor Pierre Agostini and Professor Anne L’Huillier, of the 2023 Nobel Prize in Physics for experimental methods that generate attosecond pulses of light for the study of electron dynamics in matter.

Other collector coins to be issued by the NBH in 2024 include one celebrating the 50th anniversary of the invention of the Rubik’s Cube and another paying homage to Kincsem, the record-breaking Hungarian thoroughbred racehorse, foaled 150 years ago.

When will Hungary introduce the euro and what effect will it possibly have?

forint euro bills

While many believe that switching to the euro will cure an endless list of problems in a country, it is not that simple. Surely, it has many benefits; a common European currency can help align economies, level the playing field in local markets, and boost global influence. However, sometimes adopting the euro can cause more harm than good. Thus, Hungary should be highly tactical and considerate about its introduction. Here is what experts say.

A myriad of advantages or a huge backlash?

As Pénzcentrum writes, many view the euro as a saviour. The advantages it brings, like aiding the development of countries and fostering fair competition in markets, are undeniable. However, it comes with its drawbacks, notably the diminishing autonomy of national economies and its impact on monetary policy. Predicting how these consequences will unfold is a complex task. Thus, it leaves economic and financial decision-makers with ‘the acid test’. This has been evident in the experiences of two neighbouring countries, Croatia and Slovakia. It also sheds light on the intricate reasons behind the delayed adoption of the euro in Hungary.

Will Hungary introduce the euro?

In contemplating the matter of autonomy, a pressing question emerges: when will Hungary witness the advent of the euro, affording us the prospect of sustaining our economic catch-up endeavours under its auspices? At the moment, the outlook appears affirmative, yet the commencement of this transformative era remains veiled in uncertainty. A conspicuous lack of clarity surrounds the timeline for the euro’s introduction. Oddly, only Poland is in a similar situation as Hungary. Romania and the Czech Republic are staunch defenders of their respective national currencies. Despite that, they have managed to delineate a date for the euro’s introduction. Presently, this eludes our country.

Providing the right background

The Hungarian National Bank (MNB) aims to join the eurozone with Hungary being a well-prepared, competitive economy, thus ensuring the uninterrupted progress of economic cathing-up under the euro’s umbrella. György Matolcsy, the President of the Hungarian National Bank, has emphasised that Hungary is not currently meeting the necessary criteria for euro introduction. Challenges include difficulties in meeting the nominal Maastricht criteria, particularly in the face of high inflation in recent years. Matolcsy highlighted:

Our inflation is higher, and our long yields are above current limits.

Major changes in the next five years

In addition, Matolcsy also emphasises the importance of learning from the mistakes of other countries. For instance, Slovakia and Mediterranean countries provide a cautionary tale. Meanwhile Baltic countries, with the right amount of patience and preparation, have been able to successfully catch up with the euro.

Matolcsy affirmed the Hungarian National Bank’s dedication to adopting the euro. He is confident that with appropriate economic strategies, the necessary level of development for a successful and secure euro introduction could be attained in the medium term. Notably, in financial parlance, the medium term spans one to five years. Matolcsy envisions that the optimal scenario for Hungary’s adoption of the euro could materialise before 2030.

Read also:

Hungarian forint falls to its lowest this year

huf forint money hungary's economy wage financial health

The forint continues the slow weakening it has started. Today, it reached its lowest level of the year so far.

The forint continued its slow weakening: on Friday morning, it was 383.5 to the euro, hvg.hu reports. The Hungarian currency has not been at this level in 2024, and the last time it was this weak was the days before Christmas.

The forint was at its highest level so far this year on 9 January, when it was 377.2 to the euro. There has been no dramatic fall since then, but the last few days have seen a slow decline.

One dollar was worth HUF 352.8 this morning, the weakest since mid-December.

There have been a number of news this week that may have investors a little worried. The Hungarian central bank hinted that it may speed up the pace of interest rate cuts. Viktor Orbán said in a radio interview on Friday morning that no further EU conditions are expected to be met, so the rest of EU funds may remain frozen.

Read also:

Hungarian central bank: big turnaround to come, forint reacts

Hungary central bank governor Matolcsy

The deputy governor of the Hungarian central bank (MNB) hinted at a conference in Vienna that an interest rate cut of up to 100 basis points could be on the cards from now on. The Hungarian forint also reacted to the statement.

On the basis of the information currently available, there are as many arguments for cutting interest rates by 75 basis points as there are for cutting them by 100 basis points at the end-January rate decision meeting, Barnabás Virág, the national bank’s deputy governor, told the Euromoney conference in Vienna, Portfolio reports, based on Reuters.

With this, the deputy governor of the MNB implied that the central bank can speed up the pace of monthly interest rate cuts.

The central bank has cut the base rate by 75 basis points in recent months. The deputy governor said that even if this acceleration happens, it will only be for a transitional period of one to three months.

Virág also said that current market pricing is realistic, suggesting that the base rate of the MNB could fall to 6-7 percent by mid-year from the current 10.75 percent, although he added that “I think it is too early to judge because it depends on the data”.

Portfolio pointed out that the forint also reacted to Barnabás Virág’s words: it weakened from 379.5 to over 381 against the euro.

Read also:

Could the smallest coin be withdrawn and a new forint banknote arrive? The MNB answers

New forint coin will appear in Hungary

Despite recent inflation, there are no plans to phase out the 5 forint coin from circulation. Notably, the Magyar Nemzeti Bank has not provided any indication regarding the introduction of a higher denomination than the current one.

Addressing the issue, the Magyar Nemzeti Bank (MNB) responded to a query from vg.hu, stating, “As the HUF 5 coins actively participate in cash circulation and show no signs of diminishing in usage, unlike the previous scenario with the withdrawal of HUF 1 and 2 coins, there is currently no intention to withdraw the HUF 5 coins.”

With a current circulation of 825 million 5 forint coins, reclaiming half of them would entail handling more than 1,700 tonnes of coins, incurring significant costs for the MNB. Additionally, these coins demonstrate robust durability and do not need to be  scrapped.

Crafted from brass, the five-forint coin has seen an escalation in its production cost. Presently priced at 6 to 8 forints, it is gradually losing relevance due to inflation.

The MNB also indicated whether a denomination higher than HUF 20,000 is expected. “In the MNB’s current cash strategy, the Monetary Council has decided to maintain the current denomination structure, and there is no introduction or inclusion of new banknote or coin denominations on the agenda.” So for the time being, there will be no new denominations, even if there is a demand.

In response to inquiries about the possibility of introducing a denomination higher than HUF 20,000, the MNB clarified, “As per the MNB’s prevailing cash strategy, the Monetary Council has resolved to uphold the current denomination structure, with no plans for the introduction or inclusion of new banknote or coin denominations at this time.” Hence, for the time being, there will be no new denominations, even if there is a demand.

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Hungarian forint starts 2024 with weakening + prognosis

huf forint money hungary's economy wage financial health

On Tuesday morning, the forint weakened against the euro and the dollar compared to early Monday evening levels. The domestic currency strengthened against the Swiss franc. Analysts expect a weaker forint this year compared to last year.

Weak start to the new year

The euro was up slightly from early Monday evening levels. At around 7 AM on Tuesday morning, the euro was worth HUF 383.6, compared to 383.27 on Monday afternoon, Index reports.

In contrast, the Swiss franc weakened slightly from HUF 412.65 to 411.8. The dollar rose slightly against the Hungarian currency, from HUF 347.22 to 347.5. The euro fell slightly against the dollar, from USD 1.1041 early on Monday to USD 1.1032 around 7 AM on Tuesday morning.

Weaker forint in 2024

Zoltán Varga, a senior analyst at Equilor Investment, told Index at the end of December that he expects the forint exchange rate to be weaker than last year by the end of 2024. However, he believes the weakening could be moderate.

His findings are based on the possibility that the central bank’s continued interest rate cuts could further reduce the forint’s interest rate advantage, as the European Central Bank and the Federal Reserve are not expected to start their rate cutting cycle until the second half of the year.

Thus, Equilor expects the EUR/HUF exchange rate to be around 395 by the end of the year.

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Hungarian forint: Europe’s favourite currency

Hungarian forint

In Europe’s Medieval era, the Hungarian golden forint held a prestigious status as one of the most favoured currencies on the ‘Old Continent’. This esteemed position was attributed to the resilience of Hungarian coins, as Hungary emerged as a leading producer of pure and high-quality gold in Europe.

Before the mid-13th century, the scarcity of good-quality gold in Europe hindered the creation of gold coins. Instead, gold coins flowed into Europe from the Middle East and Africa, where gold was abundant.

European monarchs and nobles, lacking good gold resources, crafted silver coins for long-distance trade. However, the constant devaluation of these coins, achieved by reducing their silver content, rendered them unreliable for ordinary people. Only the experts could tell by their appearance or other physical features how much silver these coins contained. The aftermath of the Crusades aggravated the issue, as Eastern products flooded the European market, challenging payment capabilities.

In response, Italian cities, starting with Florence and their fiorino d’oro, began crafting gold coins from imported gold, notably from the Mali Empire and Timbuktu. Following Florence’s lead, Genoa, Milan, Rome, the King of Naples, the French and the English embraced this approach. The stability of these golden coins stemmed from their producers maintaining their gold value.

Hungary enters the game with its valuable golden forint

Hungary’s entrance into the game marked a significant turning point. In the late 13th century, amidst chaos, Charles I (Károly Róbert) managed to acquire the throne, defeating oligarchs and establishing a powerful, centrally governed kingdom. Supporting landlords in gold discovery facilitated Hungary becoming the primary global producer of gold, meeting 11/12 of the world’s  (i.e. Europe, Asia and Africa) gold demand through Czech and Hungarian gold mines.

Charles I Hungarian forint
Charles I’s forint. The Anjou coat-of-arms. Photo: Creative Commons

Therefore, both kings decided to mint gold coins following the Florence pattern, which explains where the name of the Hungarian currency comes from. The Hungarian gold forints depicted the Anjou coat-of-arms and Saint Ladislaus (1077-1095), g7.hu wrote.

Those coins became extremely popular in Europe because they held their value for decades. For instance, in 1361, a debt owner told the Frankfurt am Main authorities that he would settle his debts in Hungarian forint.

In 1335, Charles I prohibited the export of unprocessed precious metals, reflecting the strategic importance of Hungary’s gold resources. However, this abundance posed challenges, causing goods production in Hungary to become expensive, affecting competitiveness in the markets and leading to trade balance issues.

Despite these challenges, Hungary retained its status as Europe’s second-largest gold producer until the discovery of America and the influx of Latin America’s gold, which eventually led to Spain’s bankruptcy.

The golden forints minted during King Matthias’s reign (1456-1490) also gained widespread popularity. These forints were reproduced in regions such as Russia, North Italy and the Habsburg Empire, but the forint remained distinctly a European currency, not reaching Asia or Africa. In the 15th century, Hungarian forint coins depicted the Madonna and Saint Ladislaus.

Mathias’s golden forint with Saint Ladislaus. Photo: Creative Commons

Read also:

  • ‘Who’ did we pay with? – the Forint throughout history – Read more HERE
  • TOP5+1 surprising facts about the Hungarian Forint in THIS article

The Hungarian forint has been mixed in recent days

forint bank card coin money bond finance interest rate freeze Hungarian government orbán

The forint exchange rate was mixed against the major currencies on Thursday morning compared to the early evening quotations on the international interbank foreign exchange market.

The EUR weakened to HUF 382.21 at 6.30 PM from HUF 382.45 early on Wednesday. The Swiss franc rose from HUF 408.90 to 409.37, while the USD fell from 344.13 to HUF 343.82.

The euro moved from USD 1.1111 to 1.1117 in early evening.

What happened this year? — These were the most popular articles on DNH in 2023

budapest buda castle

2023 has been an incredibly eventful year. Wizz Air dominated headlines, the most beautiful Hungarian was elected, the forint was in the doldrums and celebrities swarmed Hungary. We also reported on a Hungarian national spying for Russia and a new store opening. As we bid adieu to this eventful year, let’s revisit its highlights through the lens of the most-read articles on Daily News Hungary. We extend our gratitude for your trust and anticipate the unfolding of new narratives in the days to come.

No more Schengen?

The biggest hit of this year happened to be a news snippet in October, reporting that border controls would be reintroduced at the Slovenian-Hungarian border. Wars, political tension and concerns regarding illegal migration have changed the strategy of many central European countries, igniting fears that the era of free travel within the European Union might be nearing its end.

The new Miss World Hungary

June witnessed the crowning of Boglárka Hacsi as the new Miss World Hungary, representing the nation on the global stage. In this article, we presented not only the winner but also the winner of this year’s debut public vote and all the podium finishers. You can read more about the history of the competition and the contestants in this article, with a plethora of stunning photos.

Dating a Hungarian?

Following the visual feast of Miss World Hungary, curiosity naturally turns to the intricacies of dating a Hungarian. Navigating the waters of cross-cultural romance, especially with Hungarians, proves to be a challenging experience given the uniqueness of Hungarian culture and language. However, we’ve got your back. Here’s everything you need to know before dating a Hungarian including familial dynamics, Hungarian cuisine and date night ideas.

Wizz Air

Tourism and travel have always been popular among our readers. Therefore, it should come as no surprise that travel news is also a highly sought-after topic on Daily News Hungary. An early summer surprise awaited travellers as Wizz Air came up with a mystery game, whisking winners away to undisclosed destinations. Neither the airport nor the pilot gave away any clues. To find out where the mystery plane landed, check out our article.

The unveiling of new flight routes to South Asia’s bustling metropolis added another layer to the airline’s narrative. However, not all was smooth sailing, as Hungarian authorities launched an investigation in February, accusing the airline of misleading passengers. Delve into the details here.

What will happen to the forint?

Even though this article was published on the last day of 2022, its impact has been still relevant this year. According to experts, Hungary might bid farewell to its national currency, replacing it with the euro.
Slovakia introduced the euro in 2009 and Croatia on 1 January this year, while in Hungary it is still not on the cards. The worsening forint-euro exchange rate poses challenges for Hungarian travellers, with some experts even having predicted a dire collapse back in April.

Celebrities, Russia and a new store

There is life beyond the economy, tourism and politics, of course. Residents and expats alike were buzzing about the arrival of Primark, marking its debut in Hungary.. There was a great public outcry when the Hungarian press published incorrect opening dates, which the chain later rectified. Celebrity spectacles unfolded as Johnny Depp visited Hungary for both a cancelled concert and a film shoot, and news of how the world-famous celebrity is treating his crew came to light.

Meanwhile, the Russian-Ukrainian war, a topic of grave concern given Hungary’s proximity and strategic alliances, took an unexpected twist with a Hungarian individual implicated in espionage and embezzlement of Ukrainian aid for Russia.

Experts’ grim prognosis for Hungarian forint: 450/EUR on the horizon?

forint historic lows

In recent months, the Hungarian forint has demonstrated significant strength, yet its exchange rate hovers around 380/EUR, and indications suggest this trend is not poised for an immediate shift. Despite its stability at the 380/EUR level, experts anticipate a substantial weakening in the long run.

As reported by Tőzsdefórum, a Hungarian business-centric online news outlet, the forint’s current stability at the 380/EUR exchange rate level may result in a commendable 5% strengthening against the euro in 2023—a positive development.

However, analysts warn that 2024 may witness a notable forint weakening, although predictions dismiss the likelihood of reaching new historic lows.

Additionally, financial experts highlight that the Hungarian National Bank’s (MNB) monetary policy is the main influencing factor behind the fluctuation of the foreign exchange rate. And the MNB’s upcoming decision on interest rates in December is anticipated to lead to another probable decrease.

Zoltán Varga, an analyst of Equilor, told Világgazdaság that the interest rate cuts are expected to result in a gradual forint weakening. On the other hand, they are a crucial element in the MNB’s stimulus package. In other words, while advantageous for the business sector, as they facilitate cost-effective production in Hungary, they present challenges for employees receiving salaries in forint, particularly those wishing to make purchases in euros or acquire imported products.

Forint remains a highly volatile currency

Equilor projects an average currency exchange rate of 400/EUR in 2024, escalating to 405/EUR in 2025. Meanwhile, the Egyensúly (Balance) Institute predicts a range of 393-403/EUR for 2024 and 406-419/EUR in 2025. These are averages, and actual rates may fluctuate between 450/EUR and 380/EUR based on accurate prognosis.

The uncertainty surrounding EU funds adds another layer of complexity. While Hungary anticipates approximately EUR 1 billion in 2024, the disbursement of euro billions remains frozen due to rule of law concerns. Any positive impact on the forint hinges on the release of these funds, though the likelihood is deemed slim. Consequently, the forint remains responsive to developments related to EU funds.

Furthermore, external factors, including geopolitical events in Ukraine and Israel, the policies of major national banks worldwide and measures implemented by the Hungarian government, exert notable influence on the euro-forint currency exchange rate.

Read also:

  • Hungary’s economic forecast: inflation, growth, and exchange rates – Read more HERE
  • Central bank governor talks about euro introduction in Hungary – Details in THIS article

Investment volume falls 12.1 pc in Q3

In a recent report, the Central Statistical Office (KSH) revealed a notable annual contraction of 12.1% in Hungary’s investment volume during the third quarter. Released on Tuesday, this data also indicated a seasonally adjusted quarter-on-quarter drop of 2.2%. According to the KSH, nearly all sectors of the national economy contributed to this downturn, with a silver lining seen in increased investment volume solely within the manufacturing sector, public administration and a few smaller segments.

Specifically, the manufacturing sector experienced a promising 6.3% year-on-year growth in investment volume, contrasting sharply with a 21.6% decline in the construction sector. The total investment figure for Q3 reached HUF 3,781 billion, with the manufacturing sector accounting for a substantial HUF 1,202 billion. In response to these figures, the economic development ministry acknowledged external factors impacting investment trends in the third quarter. The ongoing war in Ukraine and the EU’s sanctions played a role, alongside diminished demand and elevated interest rates, collectively contributing to the overall decrease in investment volume.

Despite the challenges, the ministry highlighted positive aspects of the economic landscape. Notably, inflation contracted to below 10% in October, and real wages showed growth. However, a significant hurdle to economic growth and investments emerged in the form of escalating positive real interest rates, attributed to a high base rate above inflation. The ministry expressed concern, stating, “This is impeding consumption and investments.”

Amidst the overall decline, the ministry welcomed, however, that in manufacturing, including in car and battery making, investments had increased, echoing the positive trends observed in the initial two quarters of the year.