Forint in 3-month record low and declining – HUF 400/EUR comes?

The euro-forint exchange rate stood at 384.59 on Saturday, but it was higher yesterday. Thanks to the national bank’s considerable base interest rate increase in autumn 2022 to 18 percent, the forint’s downfall could be stopped. But it seems the strengthening is over (the currency exchange rate reached digits below 370/EUR before), and a weakening period starts. But when will that be over, and what should we expect?

According to g7.hu, a Hungarian economic news outlet, the forint weakening was exceptionally quick this week. It lost its value in only eight days, an unprecedented term in the last three years. The Hungarian national currency hit a historic peak against the euro in October 2022 (434/EUR). But it stood below 370/EUR last week thanks to some drastic protective measures the national bank implemented last autumn.

The reasons for the weakening are partly external and partly internal. Among the external ones, g7.hu mentions the depression on the global money market starting on Wednesday. Meanwhile, among the internal factors, they write about the worrying state of Hungary’s state budget and economic development minister Márton Nagy’s suggestion to raise the 2023 inflation target. Furthermore, the national bank decreased the base interest rate from 18 percent to 16 percent.

Meanwhile, G7.hu said that the forint only corrected its exchange rate against the euro because it has become overvalued in the last few months. Index.hu referred to Dániel Molnár, who said the European Commission published its latest rule-of-law report about Hungary this week, and it did not contain any good news about getting the EU allocations. Billions of euros are at stake; we wrote about that HERE.