Why has the Hungarian forint weakened against the Polish zloty?

The Hungarian forint started weakening this Monday against all the major currencies. In addition, it has reached an annual low against a regional currency, the Polish zloty. The zloty is going extremely strong, it’s currently at its best compared to the past three years.

Napi.hu reported that the Hungarian forint is nearing the 400/EUR threshold, leaving behind the 370/EUR zone. As if the 387/EUR exchange rate wasn’t bad enough, things are expected to turn for the worse. The Polish economy is on a similar trajectory as the Hungarian. When comparing the two countries’ currencies, we find that the forint has weakened significantly against the zloty. During the Covid pandemic, the two currencies were more or less of the same growth and shrinking curve. However, this spring, the forint started falling dramatically. Due to the measures taken by the Hungarian National Bank, the exchange rates were back to normal for a while.

Widening differences

According to the Hungarian Minister of Finance, the aim is to achieve a stable forint exchange rate. Yet, the current weakening is rather worrisome, especially given that even the zloty has continued to strengthen. The zloty exchange rate has reached a three-year high against the euro. Meanwhile, the forint has hit an all-time low this year against the Polish currency. It only adds to the problem that Hungary is the only one among the emerging EU countries with an independent currency that is facing a massive domestic currency weakening. The Czech koruna has been strengthening against the euro for many years. The Bulgarian leva is doing great with its fixed exchange rate, and the Balkan country is already in the process of joining the eurozone. The zloty was the only currency that had its highs and lows along the forint. Now, this has come to a dramatic end.

Polish zloty to boost Polish wages

It’s hard to pinpoint the exact reasons why the forint is the only currency in the region that has been languishing. Certainly, we all root for the forint to have a triumphant breakthrough and find an equilibrium. In this current situation, even the Hungarian National Bank could have easily achieved this through an intervention. Of course, no miracles are expected. But it isn’t ideal either that the forint lags so much behind the zloty. In fact, the widening difference between the exchange rates of the two currencies also prompted the average Polish net wage to exceed and leave far behind the Hungarian one. Poles now earn 20 percent more than Hungarians, which is a major advantage.