Hungary’s forex dilemma

Hungary’s ‘yes’ vote in last month’s referendum on EU accession has sent another positive signal to investors that the country is quickly taking its place in mainstream Europe. As Hungarian economic integration gathers pace and the foreign exchange market continues to liberalise and gain liquidity, the corporate sector will have to hone its fledgling currency hedging skills. Since February, the forint has been trading within a stable band. However, in January it depreciated rapidly by 6% after the National Bank of Hungary slashed interest rates by 200 basis points, causing corporates to seek hedges through the currency derivatives market. Some economists believe the forint could be in for a wild ride in the run-up to EU accession on May 1, 2004, and dealers are rolling out hedging tools to cater for what they hope will be growing demand.

“The referendum is a further signal to both domestic and international corporates that, as Hungarian capital markets become more integrated into Europe, and cross-border flows increase, the need for more sophisticated financial instruments to manage market risk will develop in the run-up to EMU entry,” says Anne Louise Gibbins, an emerging markets specialist at JP Morgan Chase in London.

Hedging foreign currency risk, once rare, has become more common following the central bank’s decision to

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here