Despite all, the Hungarian forint is still going strong: how?

The government did not inspire confidence with its intervention in the bond market. The fate of EU funds is very uncertain. Despite these factors, the forint is shaking off these concerns, whereas in the past, they would have weakened the currency.

There have been several events recently, which were supposed to make investors lose confidence in the strength of the Hungarian currency. Nevertheless, the forint is going as strong as ever. According to experts, there are good reasons for this, Forbes writes.

The negatives

1. The Hungarian government abruptly intervened in the savings market, with people being more and more pushed to purchase government bonds. Such steps, especially when taken without prior communication and consultation, do not strengthen investor confidence.
2. We are not making much progress in accessing the EU funds. Márton Nagy, Minister for Economic Development, recently spoke about the need to prepare for a scenario without EU funds. At the same time, Finance Minister Mihály Varga stated that the government has no backup plan in the 2024 budget in case the EU funds don’t come through.
3. The budget, filled with optimistic figures, is showing cracks, as it includes several tax increases. Market participants are increasingly monitoring whether the deficit will spiral out of control.
4. Meanwhile, the Hungarian National Bank (Magyar Nemzeti Bank, MNB) has begun its interest rate-cutting cycle. However, this process hasn’t been well-prepared and accompanied by consistent and tight communication.

Forint still going strong

Despite the aforementioned factors, which had always weakened the currency thus far, the forint unexpectedly strengthened to a one-year high against the euro on 9 June, with an exchange rate of HUF 367.69 per euro. The exchange rate has remained below the 370 level since then.