You would not have thought but this is why the forint is falling

According to Index.hu, it is not Hungary who stands behind the falling of the forint but the euro. However,behind the weakening of the euro, there are a lot of things: the D-word horror, big plans of the EU and the left turn in Greece. Index.hu collected these reasons.

On Monday morning, the forint started to fall, one euro was more expensive than 320 forints, the exchange rate has not been so weak for 3 years. The exchange rate was also above HUF 320 on Tuesday and Wednesday. Now, the situation is more complicated than we could blame Orban, Matolcsy, Gyurcsany or the Bilderberg group.

Analysts say that the investors had problem with the euro, and the economies of the EU members depend heavily from the eurozone so the fears spread to the other European currencies, such as the forint. Indeed, if the eurozone is weakening, it has a good chance to pull us itself too.

The euro is falling

The most noticeable trend of the entire foreign exchange market turmoil is the rough weakening of the euro against the dollar. It has good reasons and it is also bad for us.
But why could we lose this? And why is the dollar strengthening?

Starting with the latter: the American economy is pulling itself together. In the quarter, the American economy grew 5%, while unemployment is beginning to return to pre-crisis level. The FED, the American central bank plans to raise the base rate from mid-2015, so they want to withdraw money from the economy.

Other major economies’ central banks are doing the opposite: the Japanese central bank is pumping yen to the economy by bond purchases, and the European Central Bank will decide on January 22 about starting a bond-purchase program, which was discontinued by the Americans recently. The success of the programs is questionable, so it can boost the dollar more against the euro, Index.hu says.

And why is it bad for us? Because a very big part of the world’s savings are held in dollar, and the strengthening of the dollar is not good for those who have money in other currencies. This could also hurt the Templeton fund, which finances a quite large amount of the Hungarian government debt and failed $ 800 million when forint weakened recently.