Mihály Varga pledged to provide a strong response to any risks that threaten the inflation target, financial stability, and sustainable economic development.Continue reading
The Hungarian forint has been strengthening steadily against the major currencies after reaching a five-month high on Tuesday. The role of the new Hungarian central bank governor, Mihály Varga, is difficult to judge in this, says an expert asked by Index, adding that instead, he sees geopolitical factors as the main reason.
Although the environment for the Hungarian economy is unfavorable, both because of the lower chances of the Russian-Ukrainian war ending and the US tariffs, for the time being it seems that currency market players are not worried about geopolitical tensions, allowing the forint to gain ground.
As a result, the Hungarian currency strengthened to 398.5 against the euro and 375.1 against the US dollar in the morning hours.
Gábor Regős, chief economist at Granit Fund Management, told Index after Tuesday’s five-month high, that the forint has been quite exciting lately, influenced by many factors, sometimes even leading to significant intraday movements. In recent weeks, expectations of an end to the war have been able to strengthen the forint in a tangible way. This is how it went below the 400 level last Wednesday.
However, on Friday night, talks between Donald Trump and Volodymyr Zelenskyy failed, pushing the end of the war further away. The forint also felt this over the weekend: it weakened to 407, and after some correction, settled between 403 and 404.
In addition, the expert pointed out that the US president’s imposition of a 25% tariff on all products from Canada and Mexico is bad news for the forint and the Hungarian economy overall, as it is becoming increasingly certain that Europe will not escape the US tariffs either.
Thus, the current environment is not favorable for the Hungarian currency.
At the same time, the exchange rate dipped below 400 again at the beginning of the week, and it looks like it will stay there for the time being,”
Regős said, adding that it is difficult to judge the role of Mihály Varga, the new central bank governor, in this. However, at his committee hearing, the governor stressed the importance of exchange rate stability and predictability, which would indeed be important for the economy, especially in the current inflationary environment, where a weakening forint exchange rate has again caused inflation to rise well above the central bank’s target range.
Via Index, Featured image: Pexels