The Hungarian forint has recently shown a strong correlation with the US dollar. As a result, this year has been marked by a weakening of the dollar and a strengthening of the forint. Since the beginning of January, the dollar has depreciated by more than 11%, while the forint has appreciated by nearly 2.5% against the euro.
This trend also means that the movement in the dollar-forint exchange rate has been particularly intense: from above 400 at the start of the year, the rate has now dropped below 350.
In recent weeks, it has become evident that there is limited scope for the Hungarian forint to strengthen further from its current level. Initially, the euro-forint exchange rate remained in a narrow band between 402 and 404 for several weeks. Although it temporarily dipped at the beginning of last week, it became clear that the forint was struggling to break past the 400 threshold. This is partly due to the psychologically significant level and partly due to strong technical support in the 398-399 range, according to a currency market analysis by portfolio.hu.
Beyond the weakening of the dollar, the forint’s main appeal remains Hungary’s high interest rates. At 6.5%, the Hungarian interest rate is high by international standards, making the forint one of the most attractive currencies in Europe at present. However, based on domestic factors, there may be limited room for further downward movement in the euro-forint exchange rate from this point onwards.
Given the above, those who have not yet exchanged euros for their summer holidays may wish to do so now, as there is little likelihood of a significantly lower euro exchange rate before the end of the season.
While the exchange rate generally represents only a small portion of total holiday costs — amounting to just a few thousand forints — the forint’s appreciation can still be felt. At the beginning of the year, the euro was trading at around 415, and it has since appreciated by nearly 4%. Travellers heading outside Europe have even more reason to be pleased, as the dollar has fallen by more than 50 forints since January.
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