The Hungarian forint may soon hit a euro record!
The forint is showing sustained strength, helped by an increasing number of factors. The forint collapsed during the US banking crises in March, but has since regained strength. It is now close to its strongest level this year. Several factors have emerged that could even allow it to reach a top.
The forint is showing sustained strength and is being helped by an increasing number of factors, napi.hu reports. Even this year’s peak may be on the way.
The Hungarian forint is being supported
The most important stabilising factor in March was the Hungarian Central Bank’s (MNB) strong stance on exchange rate stability after the interest rate decision meeting. MNB indicated that strong fluctuations in the forint exchange rate were unfavourable. They also noted that a weakening of the forint would hamper the decline in inflation, which is the main economic aim of the government for this year. So, they were doing their utmost to ensure that this did not happen.
In addition to the support from the central bank, a fundamental factor has emerged. There was a large surplus in February’s external trade in goods, thanks to the expansion in exports, napi.hu explains. In the longer term, the exchange rate is mainly influenced by the balance of payments. The external balance of goods and services is an important part of this. Another important factor is that Hungary’s main export market, Germany, has also weathered the crisis.
Cooperation between the central bank and the government
In recent months, the forint market has been disturbed by the disagreement and tension between the Hungarian central bank and the Orbán-cabinet. Now, however, György Matolcsy, Governor of the Central Bank, and Mihály Varga, Minister of Finance, held a personal meeting. They even issued a statement on the cooperation between the government and the central bank.
Another positive point in terms of the exchange rate was a figure from the Energy Ministry showing that gas consumption fell by 25 percent in the first quarter. This is also positive for the exchange rate, because although the price of gas is now a fraction of last year’s, a quarter less gas has to be imported than a year earlier.
Annual high against the dollar is done, is the euro record coming?
The exchange rate has already reached an almost one-year high against the dollar, which we reported in detail here. However, this is also due to the weakening of the dollar against the euro. The forint exchange rate against the euro is a significant figure, as the bulk of the country’s external trade is in euros. A new annual peak against the euro would be reached at a stable level of 370. That is a change of only HUF 4 per euro compared with the exchange rate on Friday morning.
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