The slide of Hungary’s currency continued on November 27, as the forint hit a two-year low versus the euro. The EUR/HUF was quoted at just below 413 on November 27, after the close of the interbank market, and one dollar bought HUF391.

The decline has sped up after the US election, amid fears that the new leadership of the Hungarian central bank could be more dovish, and even hefty interest rate premiums have done little to halt the deprecation. The forint is on track to take the title of the worst-performing regional currency once again, extending a long-trend in place since Viktor Orban took power in 2010.

The currency has lost 8% of its value against the euro and 13% against the dollar year-to-date. On a five-year horizon this translates to a deprecation of 23% and 28% respectively, and the 10-year chart show a 35% loss in the EUR/HUF and an 59% loss in the USD/HUF pair.

Concerns are growing about the forint's future as MNB Governor Gyorgy Matolcsy's mandate ends in March. Mihaly Varga is expected to succeed him, coinciding with a government reshuffle that will merge the finance and economy ministries into a single development-focused entity. This restructuring signals significant policy shifts, with implications for monetary strategy.

The MNB has maintained real interest rates at the highest levels in the region to stabilise the currency, warning of financial stability risks. However, this hawkish stance has faced criticism from government officials, who argue that elevated rates hinder economic growth. Economic Development Minister Marton Nagy recently described the 3% real interest rate as excessive, noting its dampening effect on lending activity, investment, and growth.

Analysts caution that a more dovish approach under the new MNB leadership could intensify pressure on the forint, particularly if aggressive monetary easing is pursued. Such a move might compromise the currency’s stability, amplifying existing vulnerabilities.

The forint’s decline has increased the appeal of the euro and brought the question of the euro adoption to the front.  

Viktor Zsiday, a seasoned investment expert and manager of the Citadella Fund at Hold Asset Management, in a podcast questioned the practicality of maintaining the forint given its consistent weakening. He noted that when a currency is not "managed responsibly" it risks becoming obsolete, leading to informal dollarisation or euroisation.

This trend is already evident in Hungary, with more people converting their savings into euros or pricing transactions in foreign currency, particularly in the real estate market, where a significant number of investment-oriented purchases are by foreign buyers.

Zsiday argued that adopting the euro would impose fiscal discipline on the government, constraining economic policy. While Hungary's export-oriented economy has benefited from the weaker currency over the past decade, this devaluation has also obscured underlying competitiveness issues.

In the early 2000s, there was broad agreement that Hungary should take steps to join the eurozone. However, this consensus unravelled after the economic crisis and Fidesz's rise to power in 2010. The Orbán government has consistently opposed euro adoption, citing concerns over the loss of national sovereignty. Despite strong public backing for joining the eurozone, officials have firmly dismissed the possibility, keeping the topic off the political agenda.

At a panel discussion with Finance Minister Mihaly Varga last year, Monetary Council member Gyula Pleschinger said the country may be able to adopt the currency in the 2030s.

The central bank and government officials previously stated that Hungary should join the eurozone if its average per capita GDP level converges to that of the EU. Hungary's GDP adjusted to purchasing power parity was around 76% of the EU average in 2023, and now the country does not meet the Maastricht criteria to adopt the euro either.