The Forint Recently Reached a One-Month High: Comparing CIB Bank’s Analysis and Predictions to Current Exchange Rates
Hungarian investors recently had great news – that the forint was at its one-month high. This followed a central bank decision and was a major peak for the currency. Explore what led to this peak, how the forint’s value compared to past predictions, and where the forint currently stands.
The Peak
In late August, the forint hit its one-month high, hitting under 380 against the Euro. It even went under 379 briefly.
The forint hit its peak following the decision of the Hungarian central bank, the Nemzeti Bank, to cut its policy rate by an additional 100 basis points. This brought the policy rate closer to the Hungarian base rate.
As part of these changes, the Monetary Council set a 14% key interest rate. Meanwhile, the national bank kept the base rate at 13%, which analysts had predicted.
While the Hungarian central bank’s decision may have influenced the forint’s rising value, it was not the only factor to do so. Even before the bank changed its policy rate, the forint had already improved from 383 to 381 against the Euro. Following the decision and announcement, however, it jumped to a value of 380.87 at 4 p.m.
From there, the forint reached its peak value on the following day.
Other Factors Affecting the Forint’s Peak
According to experts like Gergely Suppan, the way the forint reacted to the interest rate decision was expected.
Suppan argued that the changes to the forint were influenced to a greater degree by the dollar’s weakening. A senior MBH Bank analyst mentioned that the sudden weakening of the dollar’s value broke the 200-day moving average. The dollar weakened because of a drop in consumer confidence and job vacancies. Those factors caused people to expect interest rate hikes, leading to the dollar dropping. At the same time, the Czech koruna got slightly stronger, and the zloty remained the same.
How It Matches Earlier Predictions
Several weeks before the forint hit its peak, CIB Bank analysts led by Mariann Trippon outlined their predictions for the currency.
There were three potential predictions for the forint depending on other factors. These predictions included the forint being at a value of 400, 385, or 365 to the Euro.
Analysts were optimistic about the forint because of decreasing European gas prices and the global market booming. The challenge is that many investors prefer not to keep funds in the forint for too long.
Analysts highlighted several risks that could worsen the forint price. To start, the national bank’s rate-lowering program would reduce the Hungarian interest rate advantage. The lack of funds from the European Union was another concern.
On the other hand, inflation was lowering, and the national bank was developing a monetary policy that was easier to calculate.
At the time, experts predicted that these advantages and disadvantages would balance each other out. They predicted an exchange rate of about 380 to 385 forints per Euro. This is in line with the peak figure that the forint reached in late August.
The Current State of the Forint
At the time of writing in mid-September 2023, the prediction remains accurate. The forint sits just above 383 per Euro, still within the predicted range of 380 to 385.
Conclusion
The forint was already on track to improve due to other factors, such as the dollar weakening. Between Hungary’s loss of an interest rate advantage and the inflation rate dropping, experts predicted that the forint would be around 380 to 385 per Euro. It has performed as expected, with a peak below 379 in late August when factors were favorable.
Sources:
https://dailynewshungary.com/forint-jumps-to-a-peak-after-major-decision-of-central-bank/
https://www.cnbc.com/quotes/HUF=
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