Economy
Hungarian rate-setter says HUF could be propped up by abatement of euro crisis
The Hungarian Development Bank (MFB) has said in an analysis on Wednesday that the easing of the HUF was caused primarily be regional factors in September, but it was Hungary-specific developments that brought about a weakening in the exchange rate in October.
EUR/HUF swung to over 300 at the end of October, and remains well above that level. MFB’s analysts put the spotlight on correlations between the HUF’s sharp 1.8% appreciation in March, the 7.6% easing in September and the 3.8% depreciation in October and local asset prices and the fluctuations in the exchange rate of other currencies in the region. It also examined how sensitively EUR/HUF responded to changes in global risk appetite.
The bank found that the recent sharp easing of the Hungarian currency was caused not only by external factors, as the MPC suggested, but Hungary-specific factors primarily.Gerhardt told daily Magyar Nemzet that the latest GDP data, the balance of payment figures, the country’s financing capacity and the government’s commitment to curbing the budget deficit all indicate better fundamentals than what investors attribute to Hungary. He believes that the hammering of the forint to record lows versus the euro is a consequence of “histerical sentiment" on the money market.
In his view, the forint is being attacked for Hungary’s debt-to-GDP ratio is very high compared to elsewhere in the region and its structure is also unfavourable, because Hungary’s debt is not domestic but mostly external
Gerhardt said money markets went berserk and a host of self-fulfilling prophecies have been released. The forint could be strengthened if the debt crises in Europe could be tamed somehow, he added.
One way to achieve that would be if the EU remained on the path set by European Commission President José Manuel Barroso.
Barroso said in an inflammatory speech that the eurozone faces a systemic crisis and that a fragmented European Union of two tiers was not an option. He added that no eurozone nation was immune from market attacks and the bloc had to act with strength and decisiveness to show investors it could handle the crisis.
“We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures," Barroso told the European Parliament in Strasbourg.
“We will not make the euro stronger through the fragmentation of the European Union," he added.
EUR/HUF swung to over 300 at the end of October, and remains well above that level. MFB’s analysts put the spotlight on correlations between the HUF’s sharp 1.8% appreciation in March, the 7.6% easing in September and the 3.8% depreciation in October and local asset prices and the fluctuations in the exchange rate of other currencies in the region. It also examined how sensitively EUR/HUF responded to changes in global risk appetite.
The bank found that the recent sharp easing of the Hungarian currency was caused not only by external factors, as the MPC suggested, but Hungary-specific factors primarily.Gerhardt told daily Magyar Nemzet that the latest GDP data, the balance of payment figures, the country’s financing capacity and the government’s commitment to curbing the budget deficit all indicate better fundamentals than what investors attribute to Hungary. He believes that the hammering of the forint to record lows versus the euro is a consequence of “histerical sentiment" on the money market.
In his view, the forint is being attacked for Hungary’s debt-to-GDP ratio is very high compared to elsewhere in the region and its structure is also unfavourable, because Hungary’s debt is not domestic but mostly external
Gerhardt said money markets went berserk and a host of self-fulfilling prophecies have been released. The forint could be strengthened if the debt crises in Europe could be tamed somehow, he added.
One way to achieve that would be if the EU remained on the path set by European Commission President José Manuel Barroso.
Barroso said in an inflammatory speech that the eurozone faces a systemic crisis and that a fragmented European Union of two tiers was not an option. He added that no eurozone nation was immune from market attacks and the bloc had to act with strength and decisiveness to show investors it could handle the crisis.
“We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures," Barroso told the European Parliament in Strasbourg.
“We will not make the euro stronger through the fragmentation of the European Union," he added.
