Updated: Feb 12, 2019
In mid-January the Hungarian forint seems to have made a level change, significantly increasing in value around January 15, 2019. On January 15th the exchange rate was 322 Hungarian Forints per Euro but it strengthened by 1.6% – a full 2.5 standard deviations – over the week, starting the following Monday (January 22nd) at 317 Forints per Euro. It remained around this new level for the rest of the month and even strengthened further in its later days of trading. Currently the Hungarian forint trades around 319 (as reported by the Hungarian National Bank on February 9th) suggesting it lost some of its gains in January and may be returning to historical levels against the Euro.
Nothing exceptional seems to have happened in the news around mid-January, however. Hungary did have several positive news items concerning continued expectations of strong growth and strong wage growth, but nothing that was un-anticipated.
The Hungarian interest rate (the EMU bond convergence rate) dipped on the same dates and has also remained below it’s historical levels as shown in the graph. The graph shows the Hungarian interest rate, its three month rolling average which is 3.27 and its lower bound (average minus one standard deviation) of 2.89. The Hungarian interest rate has hovered around its lower bound and dipped noticeably around January 15 as well indicating that there was indeed some reaction in the market.
The Budapest stock market (BUX) also enjoyed a minor rally around the same period in January. The BUX index has been performing at the top of its 3 month range throughout January, reflecting again a strong economy and well performing companies.
The biggest news items during that week focused on positive Hungarian economic news, especially in terms of continued strong wages. The only two exceptional news items that week were that the International Investment Bank will open an office in Budapest and that Germany’s Schaeffler Group confirmed that the company will likely expand its activities in Debrecen by another 400 or so additional jobs.
The final conclusion is that there was indeed a minor rally in Hungary, strengthening the currency during the mid-month around a few positive economic developments. While these are all positive, nothing fundamental changed and the Forint and interest rate should eventually return to their historical levels. The BUX should likely continue to rise at its historical growth rate. All are indications that Hungary has started 2019 strong.