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Analysts Expect New Low Peak for Forint in 2020

Péter Cseresnyés 2020.01.08.

The forint fell to a historic low in 2019, breaking negative records several times during the year. Analysts believe the trend will likely continue in 2020, albeit at a slower pace, mainly driven by the negative real interest rates due to high inflation and the risk of a slowing global economy.

Over the past year we have witnessed the steady depreciation of the Hungarian currency. In January, the Euro traded at around 320 HUF, while the exchange rate fell below 315 in Q1 of 2019.

From that point, however, the forint started to weaken until the end of November, when it hit its all-time low at over 337 against the Euro.

Although the currency slightly strengthened at the end of last year, analysts asked by economy news portal Portfolio, generally agree that, the forint could easily reach another low peak against the Euro in 2020.

Will Historic Low Forint Lead to the Introduction of the Euro?

Orsolya Nyeste, an analyst at Erste Bank, says that despite the weakening of the currency, the forint has appreciated somewhat against the Euro, but no sustained nominal appreciation is likely.

The main reason for this is that the Hungarian monetary policy stance remains loose, the real interest rates are deeply negative, and no change of direction is likely in the near future.

In addition, until a more serious inflationary risk occurs, the forint’s nominal depreciation is seen as a kind of competitive reserve by the Hungarian National Bank (MNB). This way we can expect a slow consolidated depreciation in the long run. This way, it is likely we will see the forint hitting a new low in 2020.

Hungarian Forint Falls to Historic Low

Péter Virovácz, chief economist at ING Bank, had a similar prediction regarding the currency’s future position and noted that the forint is expected to remain the least attractive currency for investors in 2020.

Although the Hungarian currency is expected to weaken in 2020, it is unlikely to continue the trend with the same amplitude as in 2018 and 2019.

According to János Samu, Deputy Chief Executive Officer of Concorde, currently the forint is not considered expensive in terms of competitiveness, comparatively speaking.

The central bank has again considered inflationary risks symmetric in relation to the latest interest rate decision, so that the forint may remain in place against the Euro until inflation eases, the analyst noted.