- The Forint has been oscillating in response to the latest rate decision by the Hungarian central bank.
- USD / HUF reached 18-month highs above 322.00, but has since fallen back towards 320.00.
El forint húngaro has experienced oscillating conditions in recent trading, with USD / HUF at one point topping previous weekly highs at 322.00 to touch new 18-month highs, before returning to 320.00. At 13:00 GMT, the Hungarian central bank (Magyar Nemzeti Bank of MNB) announced that it had decided to raise its base rate by 30 basis points to 2.1% as expected, marking a further acceleration in the pace of monetary tightening. The overnight deposit rate also rose 30 bps to 1.15% as expected.
At the September meeting, the bank opted to slow down the rate hike from 30 bp per meeting to 15 bp and followed up with another 15 bp hike in October. The forint did not like the decision to slow down the pace of rate hikes and, at current levels, the USD / HUF is up almost 4.0% from its September lows of around 308.00.
Despite the MNB’s decision to re-accelerate the pace of rate hikes, the USD / HUF’s initial reaction was a sudden move higher above 322.00 from around 320.50 previously, suggesting that some traders had bet on a higher rate hike. Some may have been betting / hoping that the Hungarian central bank would follow in the footsteps of its Polish and Czech counterparts to implement a much higher rate hike than expected. The Polish central bank raised interest rates by 75 basis points in November and the Czech National Bank by 1.25%.
USD / HUF was able to pull back lower, however, in the wake of the press conference following the MNB policy meeting, which began at 2:00 PM GMT. The bank promised to continue the tightening cycle as expected, noting that it could raise its deposit rate to one week above the base rate (the interest rate on its one-week deposit facility was 1.8% on Thursday last). The Hungarian central bank also said the tightening would continue until the inflation outlook stabilized, before noting that risks of inflation remaining elevated for longer have increased. In addition, the bank announced that it would stop providing liquidity to the HUF through its foreign exchange service.
After October consumer price inflation surprised to the upside at 6.5%, the Hungarian central bank said it expects inflation to top 7.0% in November. Analysts argued that the MNB is nimble and if bullish inflation persists, the bank could again accelerate the pace of rate hikes. It remains to be seen if this would be enough to turn the tide of the USD / HUF, which is now up about 7.5% on the year.
Technical levels
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