Forint has scope to recover from historic lows
2022.07.07 10:31
The Hungarian forint is expected to gradually recover and add more than 7% in the next year after plunging to fresh record lows this week, a Reuters poll of central European currencies showed on Thursday.
The forint is the worst-performing currency among its CEE peers this year, falling more than 5% to the euro in the past month alone.
It fell to an historic low of 412.50 versus the common currency on Wednesday as it was pressured by a firming dollar and a global risk-off mood, as well as worries over the local economy.
Market participants have been ditching risky assets and turning to safe havens such as the dollar amid worries about an economic slowdown as energy prices surge.
The currency has also been pressured recently by Hungary’s twin deficit, soaring inflation and the lack of agreement with the European Union over pandemic recovery funds.
However, a Reuters poll of analysts sees the forint gaining 7.28% from Tuesday’s close in the next 12 months and firming to 380 per euro. That level is significantly weaker than the 370 per euro where a Reuters poll in June saw the forint in 12 months’ time.
“There are too many uncertainties that make it very hard to predict the forint’s trajectory,” Peter Virovacz, senior analyst at ING, said.
“But if EU funds start flowing in, if the war in Ukraine ends and risk appetite returns, if inflation starts to slow and real interest rates turn positive, then the forint can strengthen. However, if the market gets used to levels between 410 and 420 it will be impossible to go back to 360.”
The Polish zloty is also seen regaining some of its recent losses by firming 4.31% from Tuesday’s closing levels, and it is expected to firm to 4.55 per euro in a year.
The currency lost more than 3% of its value versus the euro in the past month as it has been pressured by the global risk-off mood.
Investors have also become concerned about whether Poland will actually receive COVID-recovery funds from the European Union after criticism of reforms meant to unblock the cash in Brussels.
The Czech crown is expected to edged lower in coming months then regain some of its strength and add more than 1% from Tuesday’s close and firm to 24.5 per euro in the next 12 months.
