The US dollar is higher against the Hungarian forint on Tuesday morning as investors sold riskier Emerging Market currencies like the forint after the outbreak of a coronavirus in China claimed the lives of four people. Instead havens including the US dollar and gold saw a spike in demand.
USD/HUF was higher by 127 pips (+0.42%) to 302.63 as of 10am GMT, taking the currency pair back towards its highest level in 2020 reached yesterday.
At the beginning of the week, selling in the forint took the Hungarian currency to its lowest levels of 2020. But a late comeback amid some selling in the US dollar on Monday afternoon brought it back below those levels and briefly below the 302 mark. The IMF downgrading its global growth forecast as well as its forecast for the United States economy saw sentiment towards the dollar turn sour. Now as of Tuesday morning the forint is renewing its sell-off, caught in a risk-off wave across global markets following the virus outbreak in China.
As a member of the European Union, news that President Trump and Macron have agreed to a trade truce is beneficial to Hungary and the forint. While the disagreement was specifically between the US and France, it bodes well for the US approach to the EU. Trump had earlier threatened 100% tariffs on $2.4bn French goods after France passed a 3% digital services tax, mostly impacting big US tech firms including Amazon, Apple, Facebook and Google.
Demand for the dollar picked up on Tuesday when it was reported in China that a virus first reported in the Chinese city of Wuhan has spread to other countries and other parts of China. Authorities in China have said that containment procedures should keep the virus under control, in which case it might be expected for the dollar to unwind the haven flows it has received today. The risk is that if the coronavirus spreads out of control and becomes another SARS-type situation, the demand for havens like the dollar could increase.
