February 3, 2023

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The forint weakened again – Portfolio.hu

On Friday morning, the forint was around 411.5 against the euro, representing a minimal, 0.15% increase compared to yesterday in terms of the Hungarian currency. At the same time, in recent days, the market received the European Commission’s long-awaited proposal regarding Hungarian EU funds negatively. According to previously leaked news, the Brussels board recommended the freeze of 7.5 billion euros in cohesion funding and the adoption of the rescue plan, but stipulated that the distribution could be made only after the government had fulfilled all its measures. According to some investors, there is a risk that these conditions will not be fully met, which means that we cannot yet say that we have been given a clear path to defunding. On Thursday, Fitch responded sharply to the question of the portfolio. According to the credit rating agency’s commentary, a further delay in the flow of funds to the economy could negatively affect the Hungarian credit rating, leading to market pressure (weakening the forint and rising yields) and postponing further investments. Of course, this is not the only factor behind the weakening of the forint, with gas prices rising to close to 150 euros in recent weeks, now around 140 euros. It was recently around 100 euros, which means the expected cold weather will bring another wave of price hikes to the market. In forint terms, this has a negative effect on the foreign trade balance and the current account balance. Against the dollar, we are now at 390.5, while the British pound is at HUF 478.6.

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Among the forint’s rivals, the Polish zloty started the last trading day of the week with a slight gain, while the Czech crown stagnated. In emerging markets, the Turkish lira moved little against the dollar, while the Russian ruble weakened 0.25%.

Meanwhile, the dollar continues to weaken against the euro, which in principle is positive for emerging market currencies, including the HUF. The quote is now at 1.054, which is 0.15% higher than Thursday evening, and if the Euro-Dollar is still below par, you can imagine where the forint could be, which could easily be above 430 around the previous forint trough. The Japanese yen advanced half a percent against the dollar on Friday morning, while the British pound gained 0.2%.

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