K&H Analyst Commentary: The forint is on the rise

Although there have been several hectic movements in international markets in recent weeks, for example due to the armed conflict between Israel and Iran and the latest events in the trade war. In more turbulent periods, emerging market currencies are usually much more sensitive, meaning they have much greater volatility – however, the forint and regional currencies have remained relatively stable now.

“The Hungarian forint strengthened by more than 3 percent, the Czech koruna by 1.7 percent, and the Polish zloty by 0.9 percent against the euro in the first half of this year. In contrast, most emerging market currencies weakened against the euro, such as the Romanian leu, the Brazilian real, and the South African rand. It is true that the latter are quoted against the dollar, which also weakened against the euro. In the first half of the year, the US currency lost more than 10 percent of its value. The appreciation of the Hungarian currency is among the best not only over six, but also over three and one-month periods,”

said Dávid Németh, senior analyst at K&H.

The strengthening of the forint is due to the fact that the Hungarian National Bank (MNB) is committed to reducing inflation, and therefore maintains a relatively high interest rate, which makes the Hungarian currency more attractive to investors. In addition, it is important that the Hungarian current account and net financing capacity are in positive territory. This means that the country is generating a foreign exchange surplus, which also supports the forint. The expert added: Overall, the good performance of regional currencies is contributed by the relatively favorable macroeconomic indicators. Furthermore, the aforementioned conflict between Israel and Iran is relatively distant from the region and has not yet caused a lasting, marked increase in energy prices, which is also positive for the forint, the zloty and the koruna.