The US dollar is higher against the Hungarian forint on Monday morning with markets shifting into the safety of the dollar and out of the currencies from countries more sensitive to the global and European growth outlook. The spread of the coronavirus is ringing alarm bells about the much-hoped-for economic rebound in Central and Eastern Europe this year.
USD/HUF was lower by 101 pips (+0.33%) to 305.92 with a daily range of 303.14 to 306.04 as of 10am GMT, with the currency pair now at highest level since October 2019.
The dollar benefitted and the forint was hurt by data this morning showing business sentiment in Germany unexpectedly fell. As a member of the European Union, Hungary stands to benefit when the Union’s largest economy Germany is doing well. The IFO index for business ‘expectations’ saw a shock decline to 92.9, below the 93.9 reported previously and well below the 95 consensus forecast from economists. Business confidence in Germany had seemingly had a boost in the final three months of 2019 from the prospect of a trade deal between the US and China. Talk that US President Donald trump is turning his attention next on Europe could be the cause of the drop in the New Year.
The spread of the coronavirus is seeing some of the riskier emerging market currencies fall to new yearly lows on Monday. According to the Chinese health ministry there are 2,744 coronavirus cases with 80 deaths. Scientists have also confirmed the virus can spread before symptoms become visible, increasing its ability to spread quickly before being detected.
There is a rising concern about the negative impact the coronavirus outbreak and the resulting travel restrictions will have on global growth. Under the terms of its new trade deal with China, involving large agricultural purchases, the United States should be relatively insulated. That is underling some support for the US dollar. China has reportedly locked down travel in the province of Hubei, particularly in Wuhan where driving has been banned. Long-distance bus services from Beijing to other parts of China have been cancelled.