Hungarian Forint: Near-term gains against Euro before renewed pressure - Commerzbank
Commerzbank’s Tatha Ghose describes recent Forint weakness as a high-beta correction that only partly erases post-election outperformance.
Hungarian Forint (HUF) exhibited a near-term decline against the Euro (EUR), according to Commerzbank's Tatha Ghose. The decline can be attributed to a high-beta correction, which has only partially reversed the gains made by the HUF since the April election. Ghose expects the EUR/HUF exchange rate to rebound towards the 350-355 range if global risk sentiment improves, but cautions that upcoming inflation concerns and narrowing real interest rates, as the Hungarian National Bank (MNB) cuts rates further, could eventually curb the forint's recovery.
The recent correction in the HUF is a reflection of its high-beta status among Eastern European currencies. Despite the recent decline, the forint remains strong, with Tisza's ratings remaining robust, and Peter Magyar's ongoing reforms. Should the global risk backdrop ease, the HUF could regain some of its losses, moving closer to the 350-355 range.
However, the constraints and falling real interest rates are expected to weigh on the exchange rate in the longer term.
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