After months of weakening, Hungarian forint on positive trend – 370 EUR/HUF coming?

As we have seen in the past months, the Hungarian currency has been on a weakening trend. However, the forint seems to have broken out of this negative loop: it is back in good shape. The question is the same as ever: what does the future hold for the currency? There are predictions in both directions.

Forint on a strengthening trend

The forint performed well in the first third of November. The Hungarian currency managed to move well below the 380 level against the euro for the first time since July (read more HERE). The peak was 376.50, now it is a bit above 377.

If any product traded in a concentrated market (stock, commodity, currency) fails to break through a strong technical level, it will usually bounce back from there, Economx writes. This is what happened to the forint this summer-early autumn as well.

It started to move away from the 370 level, and even went as high as 395 against the euro twice. Most market participants saw that as unjustified weakness. Inflation was still around 20% and the uncertainty around EU funds was prolonged, which may have contributed to the weakening.

However, it started to strengthen over a month ago, helped by several factors. The current account has continued to improve, with a persistently large export surplus, which is the most important factor in the exchange rate, Economx explains.

Another crucial effect was the start of a rapid year-on-year decline in inflation, from 20% to below 10% in a few months. The budget deficit was larger than expected due to the fall in consumption and hence the shortfall in VAT revenues, but remained manageable (lower than in the previous year).