U.S. presidential election pushes forint to 2-year low

The Hungarian forint has been facing intense pressure against the euro, recently sinking to a two-year low of nearly 410 EUR/HUF as the U.S. presidential election introduces a wave of uncertainty into global markets. This downturn is driven by a combination of events, including fluctuating poll results, which have led to the dollar strengthening and emerging-market currencies like the forint weakening.

Presidential election impact on the dollar and emerging markets

As Donald Trump’s election odds have improved in recent weeks, the dollar has gained strength—a trend that typically exerts downward pressure on currencies from emerging markets, Index reports. Since early October, the forint has struggled to exit the 400 range against the euro, but recent election developments pushed it down further, with Tuesday’s rates briefly hitting the 410 mark. Following some market corrections, the forint improved slightly, but the currency remains highly volatile.

A stronger dollar generally spells trouble for emerging-market currencies, including the forint, as it raises the cost of imports and impacts inflation. According to analysts, a potential Trump victory could bring an aggressive U.S. economic and trade policy, sparking expectations of higher inflation and interest rates in the U.S., and causing the dollar to strengthen further. In turn, this would likely prolong the forint’s weakened position, potentially keeping it over 410 EUR/HUF.

Hungarian economy’s high exposure to U.S. trade shifts

Hungary’s economy, alongside other Central and Eastern European countries, could be significantly impacted by a U.S. Republican victory due to its exposure to the U.S. market. Last year, Hungarian exports to the U.S. totalled nearly USD 11 billion, while imports remained around USD 3 billion. A Trump win could bring protectionist measures, including higher tariffs, that may create hurdles for Hungary’s export-driven economy. In addition to currency fluctuations, tariffs would add cost pressures on Hungarian products entering the American market, potentially reducing demand and impacting Hungary’s trade balance.

What a Democratic victory might mean for the forint

Alternatively, if Kamala Harris were to win, the dollar might lose some of its recent momentum, easing pressure on emerging-market currencies. Additionally, the continuation of Democratic trade policies would likely mean lower tariffs, a development favourable for Hungary’s trade position with the U.S. Analysts believe a Democratic administration would favour looser fiscal policies, which could stabilise or even weaken the dollar, giving the forint some breathing room. This outcome could mean the forint regains strength and moves back below the 410 EUR/HUF threshold.