Hungary: Forint hits fresh all-time low in September
September 27, 2019
The forint has been trending down sharply since mid-August and hit an all-time low of 336.0 per EUR for the second consecutive day on 24 September. On 27 September, the forint traded at 335.4 per EUR, which was 1.7% weaker than its value the same day in August. The forint was also down 4.2% year-to-date and 3.5% lower than the same day of the previous year.
Downbeat data released on 23 September for German private sector activity, which contracted for the first time in six-and-a-half years in September, ratcheted up concerns over the broad-based slowdown in the European Union. This dampened investor sentiment further and weighed on the forint. On the following day, the forint hit a record low again, ahead of the Central Bank meeting on the same day amid expectations that the Bank will keep rates unchanged. The Bank did indeed hold rates steady, thus preventing the forint from bouncing back. With the Bank focused on delivering more stimulus, the HUF is seen remaining undervalued.
Commenting on the outlook for the forint, analysts at UniCredit stated:
“We believe that risks are for a weaker currency over the coming months. The NBH [National Bank of Hungary] may ramp up monetary stimulus to offset external risks to the growth, sacrificing the HUF in the process”.
Author: Nihad Ahmed, Economist