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The Hungarian forint may soon hit a euro record!
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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.
Forint April 15/22 376.18 per Euro, Forint April 15/23 373.65.
Hungarian central bank rate Apr 22- 4.25%, Apr 23 – 13%
Hungarian year over year inflation Apr 22 – 9.5%, Apr 23 – 25%
Are you better off now than you were a year ago?
What is going on now is a “carry trade” by foreign investors who are borrowing money in low interest countries to invest at high interest in Hungary. The Orban government however passed a decree in March (the government operates outside of the democratic parliament due to its’ “emergency” declaration it has continuously renewed for over two years) banning Hungarians and retail banks from putting cash in central bank facilities. When inflation finally comes down and the central bank cuts rates foreign traders reverse their carry trade and the forint will crash.
Napi says the Feb surplus in the external trade in goods is due to an expansion of exports. That is phoney baloney. Retail sales in Hungary are down 10% year over year due to the impoverishment of the Hungarian people. A lot of retail sales is made up of imported goods. From ING Bank “After January’s very disappointing performance, the Hungarian retail sector continues to suffer amid the cost-of-living crisis, as the volume of retail sales in February declined by 10.1% year-on-year (YoY), adjusted for calendar effects. We were already pessimistic about the January and February readings, but the final data exceeded even our bleakest expectations.”
https://think.ing.com/snaps/hungarian-retail-sales-fall-off-a-cliff