The forint weakened to 337.57 to the euro in early trading on January 23 to reach a new historical low. Previously, the Hungarian currency hit a historic low in November at 337.2 versus the euro. The forint softened to 304.23 from 303.31 against the dollar.
The Hungarian forint is amongst the worst-performing currencies this year behind the Chilean peso, the Brazilian real and the South African rand. Against the dollar it weakened by 3% and nearly 2% against the euro this year.
Analysts opine that the forint's depreciation will continue this year thanks to the central bank’s (MNB's) dovish policies.
Last year the Hungarian currency traded within the 325-335 range. David Nemeth, a senior analyst at K&H Bank, estimates that it will fluctuate between HUF340-345 to the euro. Brokerage Equilor also expects an exchange rate of HUF330-340 to the euro.
Hungary has extremely low-interest rates compared to surrounding countries. The weakening is the result of a conscious strategy by the central bank. The MNB is trying to shield the economy from the impact the global economic slowdown by stimulating exports through a weaker currency, investment specialist Viktor Zsiday said.
At the last Fx swap tender the MNB accepted none of the bids in all four maturities for the first time.
The drop in the swap stock was interpreted by markets as a sign of policy tightening with the MNB decreasing liquidity pumped into the banking system. The central bank will hold its next rate-setting meeting on January 28.