EUR/HUF likely to rise gradually in coming year, to reach 320 by end-2017

The EUR/HUF is expected to rise slowly in the coming year. According to a Commerzbank research report, the currency pair is likely to reach 320 by the end of 2017. This is because the Hungarian central bank’s monetary stance is expected to be comparatively dovish, even as the European Central Bank starts to taper asset purchases.

Also, this year is likely to be a year of Fed tightening, relative USD strength and risk aversion towards emerging nations, stated Commerzbank. Within this scenario, the Hungarian forint is anticipated to see a modest decline. The central bank might welcome the moderate decline as a key channel of support for the economy.

“We do not see a sharper rise in EUR/HUF because, after all, Hungary possesses a sizeable 4 percent-5 percent of GDP current-account surplus”, added Commerzbank.

In the meantime, markets have ‘got used’ to the Orban government’s unconventional policies in the last few years, and political risk premium has settled down. Inflation has decelerated to within target, while the budget gap has also contracted to within 3 percent of GDP. These developments have resulted in all the three rating agencies to upgrade Hungary back to investment grade in 2016, noted Commerzbank.