USD/HUF: Hungarian Forint Rallies Off Record Low after Jawboning

The US dollar is down against the Hungarian forint on Monday as the forint continues to edge back from all-time lows thanks to a combination of better economic data and a more active central bank. Elsewhere the US dollar was lower against the yuan after China announced tax cuts and lowered interest rates.

USD/HUF was down by 115 pips (-0.37%) to 308.37 with a daily range of 308.11 to 310.25 as of 12pm GMT. The currency pair is down 400 pips from its highs last week and has today fallen below the 309 figures. Today’s losses detract from the +0.24% gain last week.

Hungarian forint: Martin Nagy remarks interpreted as hawkish

Remarks by the Deputy Governor of the National Bank of Hungary Martin Nagy have been interpreted as hawkish in financial markets. The so-called ‘jawboning’ was designed to shore up the currency after a prolonged stretch of weakness. Jawboning is when a central bank or government official makes comments to influence the price their national currency. So far the NBH has chosen to keep interest rates low despite rising inflation but Nagy’s remarks could be the precursor to a rate hike.

Added to the positivity towards the forint was robust Hungarian GDP growth in the fourth quarter that met expectations. Hungary grew by 4.5% in Q4, down from the 5% in Q3 but nonetheless impressive given the global headwinds. While the Hungarian economy strengthens, that adds to the case that the economy can withstand higher interest rates. The S&P ratings agency upgraded its outlook on Hungary to positive from stable after the data was released.

The dollar

There is no US economic data on Monday because of the Presidents Day holiday, so the dollar is being driven by external factors. The dollar was pulled lower as the Chinese renminbi strengthened off the back of more Chinese government and central bank stimulus. Beijing plans to cut taxes at the same time the People’s Bank of China (PBOC) cut medium term interest rates that will impact nearly $29B in loans in order to minimise the likely strain on the economy from the coronavirus.

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