The Hungarian forint has seen fluctuation in the past months like never before. We have seen the dollar cost almost HUF 450, we have seen the euro cost EUR 432. Right now, the USD/HUF rate is at 368, the EUR/HUF rate is at 394. The rock bottom seems far now, but how confident can we be?
Novekedes.hu, the “entrepreneurs’ website”, interviewed banking analysts on the possible direction the Hungarian currency will take in the future. The analysts of Erste Bank, ING Bank, K&H Bank and Bankholding talked about their visions concerning the forint. We will now summarise their comments.
Erste Bank
Orsolya Nyeste, Senior Macroeconomic Analyst at Erste Bank, said that the Hungarian forint has been able to perform well mainly due to the extremely high interest rates by the Hungarian National Bank (MNB).She said that the high interest rate differential in favour of the forint has allowed the EUR/HUF exchange rate to stabilise below 400 recently.
“As we believe that the monetary policy of the central bank will continue to be very cautious in the coming months and they will be very cautious in exiting from this very high interest rate environment, we do not expect the forint to weaken back above 400 against the euro,” she told novekedes.hu.
“Overall, we think the exchange rate will be able to stabilise below 400,” she underlined. Read also: Seven Hungarians in the earthquake-hit zone, help is on its way!
ING Bank
According to Péter Virovácz, Macroeconomic Analyst at ING Bank, it is important to note that there are still many external factors influencing the forint exchange rate. Global developments continue to drive regional exchange rates. The strengthening of the dollar in recent days has made the Hungarian forint weaker, but Virovácz says this dollar strength will not be sustained.
“From an investor perspective, the forint is very much influenced by inflation, the external balance, the current account and foreign exchange reserves,” he listed.
The expert says that inflation is expected to peak in January-February and then slowly start to fall. This may show that inflation has been contained to some extent and that monetary policy is working. This will strengthen the forint.
“We clearly believe that the euro-forint exchange rate could remain below 400, with a slower, more gradual strengthening trend from the current level of 385-391,”
he concluded.
K&H Bank
“It seems that we have experienced a very significant strengthening of the forint,” said Dávid Németh, Senior Macroeconomic Analyst at K&H Bank. He stressed that it was important to mention that the FRS (Federal Reserve System) and the ECB (European Central Bank) had just recently raised interest rates. The next rate decision will be in 6 weeks’ time, in mid-March.
In the meantime, substantial new information from the US Federal Reserve and the European Central Bank is expected only in the weeks leading up to the decision. This will be an exciting period for the forint, Németh stressed. He expects the forint to test levels around 400. However, he does not expect the exchange rate to break back into the 420-430 range.
“Overall, I expect higher volatility movements, with the bottom of the range looking around 380-382 and the top around 405,” he underlined.
Bankholding
“Our last forecast was made at the end of last year, when we expected the euro-forint exchange rate to reach 390. However, since then a number of underlying conditions have improved significantly,” said Gergely Suppan, senior analyst at Magyar Bankholding. One of these is the fall in energy prices, especially gas prices, he added. This will lead to a significant improvement in the current account and external trade balance this year.
“In principle, we expect a rate above 400 only in very extreme cases, we consider a strengthening more likely,” said Gergely Suppan.