EUR/HUF 500 appears on technical analysis chart
The news agency lists several factors behind the recent sharp forint depreciation:
(1) rate hikes slow economic growth, HUF collapse fuels inflation. The direct trigger of the current HUF weakening was that the central bank (MNB) announced the end of its rate hike cycle two weeks ago. The last move was a 125bp hike to 13.0%, with the base rate up by 10% this year alone, but it still failed to tame inflation. This appears to be particularly negative in light of the fact that the consumer price index jumped to 20.1% yr/yr in September from 15.6% in August. At unchanged interest rates this implies a substantially worsening real interest rate.
(2) EUR/HUF rally is supported by USD/HUF surge since the Federal Reserve announced the tapering of its asset purchase programme.
Based on the technical analysis chart of 11 October (Tuesday), the EUR/HUF rocket is to reach 439.95, i.e.
the forint may ease as low as 440 against the euro.
For the longer term, the graph looks even worse, with EUR/HUF targets at 456.25 and 496.15. Even longer-term projections are 485 and 573.
Reuters notes that the acceleration of HUF weakening reveals the lack of hedging for HUF's drop, adding that less liquid emerging market currencies are extremely vulnerable.
Cover photo: Getty Images
