The US dollar is lower against the Hungarian forint on Friday morning as the forint pulls back from a period of weakness that took the currency to its lowest ever value against the euro. With risk aversion subsiding, riskier Central and Eastern European currencies have seen some relief. That follows the World Health Organisation not designating the virus outbreak in China an international emergency.
USD/HUF was lower by 31 pips (-0.10%) to 304.13 with a daily range of 303.4 to 305.02 as of 10am GMT, with the currency pair near the top of its 5-day price range.
The forint has been the weakest among all Central and Eastern European currencies in 2020, in large part because investors don’t see the country’s central bank reacting to the high levels of inflation by lifting interest rates. Therefore whenever investors look to remove risk from their portfolio, like happened this week during the virus outbreak in China, investments in Hungary are some of the first get sold.
The Bank of Hungary holds its next interest rate policy meeting next week. Of the 18 analysts polled by Reuters about the interest rate decision in Hungary, all 18 expect rates to remain on hold at 0.9%. The overall forecast for the Hungarian economy is that inflation will remain high, but move lower from its December peak and economic growth might slow. If the Central bank was unwilling to hike interest rates at the end of last year, it seems even likely to do so when growth might be about to weaken.
There is a little less interest in haven assets on Friday with gold, the Japanese yen and also the US dollar marginally lower. The WHO not designating the Wuhan coronavirus an international emergency has taken the fear in markets down a few levels from earlier in the week. The travel restrictions in Wuhan and the surrounding regions and cutback Lunar New Year celebrations in both Beijing and Macau will have some kind of inhibiting effect on growth in China but it now appear less likely after the WHO statement that the same will happen internationally.