Forint to recover, add 7% in next year

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Forint to recover, add 7% in next year

A Reuters poll of central European currencies showed on Thursday that the Hungarian forint is expected to recover and add more than 7% in the next year after plunging to new record lows this week.

The forint has fallen more than 5% to the euro in the past month, which is the worst performing among its CEE peers this year.

It fell to an historic low of 412.50 versus the common currency on Wednesday, as it was under pressured by a firm dollar and a global risk-off mood, as well as worries over the local economy.

Market participants have been abandoning risky assets and turning to safe havens such as the dollar amid worries about an economic slowdown as energy prices surge.

The currency was recently put under pressure due to Hungary's twin deficit, soaring inflation and lack of agreement with the European Union over pandemic recovery funds.

A Reuters poll of analysts sees the forint gaining 7.28% from Tuesday's close in the next 12 months and falling to 380 per euro. That level is much weaker than the 370 per euro, where a Reuters poll in June saw the forint in 12 months.

Peter Virovacz, senior analyst at ING, said that there are too many uncertainties that make it very hard to predict the trajectory of the forint.

If the war ends in Ukraine and risk appetite returns and interest rates turn positive, the forint can strengthen if EU funds start flowing in. It will be impossible to go back to 360 if the market gets used to levels between 410 and 420. Polish zloty has gained some of its recent losses by firming 4.31% from Tuesday's closing levels, and it is expected to firm to 4.55 per euro in a year.

The currency lost more than 3% of its value against the euro in the past month due to the global risk-off mood.

Investors are concerned about whether Poland will receive COVID-recovery funds from the European Union after criticism of reforms meant to unblock the cash in Brussels.

The Czech crown is expected to drop below in the coming months, then regain some strength and add more than 1% from Tuesday's close to 24.5 per euro in the next 12 months.