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EUR/HUF Rises After Rate Cut Before Retreating, USD/HUF Stays Lower

June 25, 2013 at 14:20 by Vladimir Vyun

Hungary's coat of arms on a 10,000-forint noteThe Hungarian forint fell against the euro today as the central bank cut interest rates in order to facilitate economic growth, but has recovered as of now. The currency managed to advance versus the US dollar, but has trouble keeping gains.

The Magyar Nemzeti Bank reduced its main interest rate by 25 basis points to 4.25 percent today. The bank explained its decision:

The Monetary Council has reduced the level of the central bank base rate in a series of small steps, but significantly overall, since August 2012. The condition of the real economy, and particularly weak domestic demand, warranted a significant reduction in the base rate over the entire period, while the outlook for inflation shifted in the same direction and changes in perceptions of the risks associated with the economy were supportive.

Moreover, the central bank noted that “there is significant uncertainty surrounding future developments in the macroeconomy and financial markets”, while “incoming data and information have confirmed that the Monetary Council had appropriate room to continue the current monetary policy easing cycle”. Such comments suggest that additional cuts of borrowing costs are possible.

USD/HUF fell from 227.54 to 227.32 as of 14:20 GMT today. EUR/HUF dropped from 298.57 to 297.26 after jumping to 299.16.

If you have any questions, comments, or opinions regarding the Hungarian Forint, feel free to post them using the commentary form below.

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