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FX Forward Market in Hungary: General Characteristics and Impact of the COVID Crisis

Author

Listed:
  • Anna Boldizsár

    (Magyar Nemzeti Bank)

  • Zalán Kocsis

    (Magyar Nemzeti Bank)

  • Zsuzsa Nagy-Kékesi

    (Magyar Nemzeti Bank)

  • Gábor Sztanó

    (Magyar Nemzeti Bank)

Abstract

Our study investigates the basic characteristics, structure and time trends of the Hungarian FX forward market. We demonstrate that, in addition to non-financial firms active in international trade, mutual funds have become key actors in this market. Hedging and speculative motives – based on expectations of EURHUF stability – can be identified in the trading of both sectors. Non-financials are however more sensitive to exchange rate changes than financial actors. Crises, such as the global financial turbulence experienced in March 2020 due to the spread of the coronavirus, are characterised by a decline in speculative trading. During the depreciation of the forint together with regional currencies at the end of March, nonfinancial firms did not increase their net long HUF forward positions, while mutual funds increased their short HUF positions due to precautionary considerations, the depreciation of international assets and liquidity shocks (redemption of mutual fund shares, increasing margin call funding requirements).

Suggested Citation

  • Anna Boldizsár & Zalán Kocsis & Zsuzsa Nagy-Kékesi & Gábor Sztanó, 2020. "FX Forward Market in Hungary: General Characteristics and Impact of the COVID Crisis," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(3), pages 5-51.
    • Handle: RePEc:mnb:finrev:v:19:y:2020:i:3:p:5-51
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    FX forward market; exchange rate exposure; mutual funds; time-varying parameter model; COVID crisis;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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