Universitatea Babe-Bolyai

University
Faculty of Economics and Business Administration

PROJECT REGARDING THE

ANALYSIS AND THE FORECAST
FOR THE EXCHANGE RATE
USD / HUF

Student: Hegyi Magor Pter

I IBM

JANUARY 2015

1. Short presentation of each currency

The USD/HUF exchange rate shows the value of 1 U.S. Dollar in

Hungarian Forints. This exchange rate is a merger of rates from multiple
sources. These include exchanges, brokerages, newspapers and central
bank sources. Furthermore, high and low exchange rates are crudely
estimated.

The United States dollar

(sign: $, code: USD) is the official currency of the United States and its
overseas territories. It is divided into 100 smaller units, called cents and it
is the most used currency in international transactions being the worlds
most dominant reserve currency. U.S. coins are produced by the United
States Mint. U.S. dollar banknotes are printed by the Bureau of Engraving
and Printing and, since 1914, have been issued by the Federal Reserve.
The symbol $, usually written before the numerical amount, is used for
the U.S. dollar. Over the thirty-year period from 1981 to 2009, the U.S.
dollar lost over half its value. This is because the Federal Reserve has
targeted not zero inflation (which would mean a constant value for the
U.S. dollar over time), but a low, stable rate of inflationbetween 1987
and 1997, the rate of inflation was approximately 3.5%, and between
1997 and 2007 it was approximately 2%.
The forint (sign: Ft, code: HUF) is the currency of Hungary and its
introduction on 1 august 1946 was a crucial step of the stabilization of the
Hungarian economy. After the democratic change of 1989-90, the forint
saw yearly inflation figures of app. 35% for three years, but significant
market economy reforms helped stabilize it. Since 2001, inflation is single
digit and the forint was declared fully convertible. As a member of the
European Union, the long term aim of the Hungarian government is to
replace the forint with the euro. Since year 2000 the relatively high value
of forint (especially compared to the falling US dollar and to some extent
to the euro) handicaps the strongly export-oriented Hungarian industry
against foreign competitors with lower valued currencies.

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2. Evolution of the exchange rate arrangement for

HUF

On May 24.2007, the IMF was notified that Hungary maintains

certain exchange restrictions related to the freezing of funds and
economic resources of certain countries, individuals and entities solely for
the preservation of the national or the international security. Therefore a
new law concerning the implementation of financial and asset-related
restrictions ordered by the EU was enacted in December 2007 and went
into effect in February 1, 2008 and all restrictions imposed by the EU are
in effect in Hungary.
Furthermore, according to the National Bank of Hungary a floating
exchange rate regime provides the central bank with better conditions to
achieve its inflation target and through this, to meet the nominal
convergence criteria and finally to enter into ERM II. Between the change
of regime and March 1995 an adjustable pegged exchange rate regime
was in effect in Hungary, in which the exchange rate of the HUF was
pegged to a foreign currency basket with an often-changing composition.
In that system, the forint was devaluated at a pre-announced date and
extent compared to a basket, in which the largest weight (70%) was first
given to the ECU and then to the German mark beside the US dollar. The
basket currency" was only the euro as of January 2000.
The National Bank of Hungary wanted to convince the government
to agree to the abolishment of the band, but the proposal has been
refused (fearing of excessive forint strengthening and exchange rate
fluctuations), until February 26, 2008, when the central parity and the
exchange rate band of the Hungarian forint were finally abolished.
Furthermore, the exchange rate arrangement was reclassified from a
pegged exchange rate with horizontal bands to independently floating.
The National Bank of Hungary considers the abolishment of the band a

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professional move, because it can enhance the credibility of economic

policy, which appears to be improving.

3. Series of data

The following table will represent the exchange rates for the year
2013.
Januar
y
02-0113
03-0113
04-0113
07-0113
08-0113
09-0113
10-0113
11-0113
14-0113
15-0113
16-0113
17-0113
18-0113
21-0113
22-0113
23-0113
24-0113
25-0113
28-0113
29-0113
30-0113
31-0113

USD/HU
F
220.21
220.78
221.79
221.8
220.33
219.3
216.19
220.86
222.57
221.77
221.5
223.32
220.05
221.25
220.48
217.23
214.96
216.89
220.93
213.17
215.25
218.81

Februa
ry
01-0213
04-0213
05-0213
06-0213
07-0213
08-0213
11-0213
12-0213
13-0213
14-0213
15-0213
19-0213
20-0213
21-0213
22-0213
25-0213
26-0213
27-0213
28-0213

USD/HU
F
218.99
217.4
215.58
222.49
220.4
223.62
219.41
215.68
217.45
225.63
216.92
221.64
218.87
227.51
227.07
220.96
226.14
226.84
226.61

March
01-0313
04-0313
05-0313
06-0313
07-0313
08-0313
11-0313
12-0313
13-0313
14-0313
15-0313
18-0313
19-0313
20-0313
21-0313
22-0313
25-0313
26-0313
27-0313
28-0313

USD/HU
F
225.96
226.84
217.59
226.89
235.46
225.4
228.54
233.89
235.56
226.67
227.37
237.12
226.98
218.28
225.94
236.25
236.06
237.89
231.98
220.27

April
01-0413
02-0413
03-0413
04-0413
05-0413
08-0413
09-0413
10-0413
11-0413
12-0413
15-0413
16-0413
17-0413
18-0413
19-0413
22-0413
23-0413
24-0413
25-0413
26-0413
29-0413
30-0413

USD/HU
F
226.82
217.86
217.88
221.41
225.78
219.55
224.5
230.1
233.36
231.37
228.25
221.64
224.26
218.98
223.12
236.12
237.52
223.23
236.2
223.61
219.72
224.67

May
01-0513
02-0513
03-0513
06-0513
07-0513
08-0513
09-0513
10-0513
13-0513
14-0513
15-0513
16-0513
17-0513
21-0513
22-0513
23-0513
24-0513
27-0513
28-0513
29-0513
30-0513
31-0513

USD/HU
F
236.13
225.87
235.45
228.35
230.18
234.38
225.27
226.18
229.39
228.19
223.06
231.68
235.45
227.19
231.78
230.75
235.51
236.78
224.63
226.28

June
03-0613
04-0613
05-0613
06-0613
07-0613
10-0613
11-0613
12-0613
13-0613
14-0613
17-0613
18-0613
19-0613
20-0613
21-0613
24-0613
25-0613
26-0613
27-0613
28-0613

225.06
221.38

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USD/HU
F
212.35
225.7
227.14
219.81
215.62
225.94
220.75
214.31
229.23
224.2
224.3
222.7
225.72
221.87
221.21
223.22
214.79
229.15
224.02
220.46

 Minimum exchange rate in 2013

Maximum exchange rate in 2013

July
02-0713
03-0713
04-0713
05-0713
08-0713
09-0713
10-0713
11-0713
12-0713
15-0713
16-0713
17-0713
18-0713
19-0713
22-0713
23-0713
24-0713
25-0713
26-0713
29-0713
30-0713
31-0713

USD/HU
F
228.12
222.48
223.8
218.39
217.7
225.78
224.77
222.62
230.48
223.63
226.02
222.15
225.62
224.02
217.28
223.72
217.72
217.93
224.53
218.6
225.04
222.97

August
01-0813
02-0813
06-0813
07-0813
08-0813
09-0813
12-0813
13-0813
14-0813
15-0813
16-0813
19-0813
20-0813
21-0813
22-0813
23-0813
26-0813
27-0813
28-0813
29-0813
30-0813

USD/HU
F

Septem
ber

USD/HU
F

225.21

03-09-13

217.58

227.26

04-09-13

211.94

227.58

05-09-13

225.66

225.22

06-09-13

222.58

226.28

09-09-13

224

226.81

10-09-13

227.75

225.23

11-09-13

224.06

224.75

12-09-13

225.66

218.71

13-09-13

219.35

224.47

16-09-13

224.23

222.54

17-09-13

219.4

225.89

18-09-13

224.82

225.09

19-09-13

219.58

226.58

20-09-13

211.49

224.22

23-09-13

223.52

222.89

24-09-13

219.56

219.26

25-09-13

216.95

222.85

26-09-13

221.56

224.95

27-09-13

224.53

224.62

30-09-13

220.6

217.86

Octob
er
01-1013
02-1013
03-1013
04-1013
07-1013
08-1013
09-1013
10-1013
11-1013
15-1013
16-1013
17-1013
18-1013
21-1013
22-1013
23-1013
24-1013
25-1013
28-1013
29-1013
30-1013
31-1013

USD/HU
F

Novemb
er

USD/HU
F

Decemb
er

212.08

01-11-13

224.42

02-12-13

219.81

213.6

04-11-13

227.6

03-12-13

221.74

220.78

05-11-13

227.5

04-12-13

217.23

220.89

06-11-13

223.13

05-12-13

219.47

212.05

07-11-13

222.49

06-12-13

217.37

213.43

08-11-13

226.64

09-12-13

217.02

221.33

12-11-13

227.2

10-12-13

218.76

219.6

13-11-13

225.29

11-12-13

223.92

221.97

14-11-13

228.91

12-12-13

215.78

228.18

15-11-13

228.76

13-12-13

220.75

229.35

18-11-13

229.83

16-12-13

214.52

227.63

19-11-13

220.44

17-12-13

220.31

227.67

20-11-13

220.33

18-12-13

220.49

222.28

21-11-13

228.12

19-12-13

216.89

225.93

22-11-13

221.17

20-12-13

222.5

221.55

25-11-13

230.29

23-12-13

219.58

230.16

26-11-13

229.46

24-12-13

219.04

222.88

27-11-13

217.54

27-12-13

218.49

225.1

28-11-13

220.5

30-12-13

222.6

221.51

29-11-13

220.59

31-12-13

215.14

229.05
226.55

5 | Page

USD/HU
F

 Minimum exchange rate in 2013

Maximum exchange rate in 2013

4. Charts

1st Quarter 2013

350

237.89
March

300
250
USD/HUF

200
150
100
50
0

2nd Quarter 2013

350
300
250
200

USD/HUF

150
100
50
0

6 | Page

3rd Quarter 2013

350
300
250
USD/HUF

200
150
100
50

211.49
Septemb
er

4th Quarter 2013

350
300
250
200

USD/HUF

150
100
50
0

The four graphs above represent the variation of the exchange rate
in 2013 based on quarterly data. According to the first quarter in 2013 the
highest value of the exchange rate occurred in the end of March, 237.89
USD/HUF. In the first quarter the exchange rate moved between a range of
213.17 USD/HUF (minimum value) and 237.89USD/HUF (maximum value).
Furthermore, in the third quarter the lowest exchange rate value
was 211.49 USD/HUF in September. In the second and fourth quarter there
were no exceptional fluctuations. The maximum value was reached only
once in the last year, although there was some exchange rate values close
to the maximum.
7 | Page

5. Explanation for the exchange rate fluctuations

As the value of ones domestic currency rises and falls relative to

other foreign currencies, the impact can be expansive. But what, exactly,
causes a currencys value to fluctuate? From the rate of inflation to
monetary policy to political and economic conditions, there are many
variables that shape a countrys currency value.
Higher interest rates can stimulate the amount of foreign investors
and their capital coming into the marketplace, causing the demand for the
countrys currency to increase. Having a higher currency value then
lowers the price of imported goods for citizens of that country. That
movement of capital can also increase currency instability because foreign
investors could stop investing at any time and withdraw their money,
causing the foreign exchange value to quickly plummet. Many central
banks attempt to manipulate demand for their currency by raising or
lowering the benchmark interest rate or the cost of borrowing currency
for reasons such as guarding against inflation or deflation, and
maintaining a healthy economy.

6. Exchange rate forecasting

Period

Yi

Y^i

|ei|

02-01-13

220.21

03-01-13

220.78

Avg.

04-01-13

221.79

07-01-13

221.8

220.93

0.87

08-01-13

220.33

221.46

1.13

09-01-13

219.3

221.31

2.01

10-01-13

216.19

220.48

4.29

11-01-13

220.86

218.61

2.25

14-01-13

222.57

218.78

3.79
8 | Page

15-01-13

221.77

219.87

1.90

..
20-12-13

222.5

219.23

3.27

23-12-13

219.58

219.96

0.38

24-12-13

219.04

219.66

0.62

27-12-13

218.49

220.37

1.88

30-12-13

222.6

219.04

3.56

31-12-13

215.14

220.04

4.90

01-01-14

218.74

Forecasted value

The Simple Moving Average method is an extremely useful tool in

order to forecast the exchange rate for the following day, in our case for
01.01.2014. In financial applications a simple moving average (SMA) is the
unweighted mean of the previous n data. Mean of time series data
(observations equally spaced in time) from several consecutive periods.
Called 'moving' because it is continually recomputed as new data
becomes available, it progresses by dropping the earliest value and
adding the latest value.
The advantages of simple moving average method are the following:
reduce the effect of temporary variations in data, improve the 'fit' of data
to a line (a process called 'smoothing') to show the data's trend more
clearly, and

highlight any value above or below the trend. The table

above shows the forecast for USD/HUF exchange rate for the next period.
The simple moving average method uses n observations to forecast
the exchange rate for the following period. In this case I forecasted the
exchange rate for 01.01.2014 by calculating the average of three recent
observations (N=3). While measuring the forecasting, the question of the
accuracy can arise, more precisely if our forecasting is correct or not since
9 | Page

it can be too high or too low. This method is measured by the forecasting
error, which is calculated as the difference between the observed value
and the forecasted value. The forecastings accuracy depend on these
errors and we can establish an accurate forecasting if this error is as
minimized as it is possible. Therefore, according to this forecasting based
on the average of the three most recent observations, the estimated
exchange rate for 01.01.2014 is 2018.74 USD/HUF.

References

http://www.mfa.gov.hu
https://www.cesifo-group.de
Annual Report on Exchange Arrangements and Exchange
Restrictions 2013 by International Monetary Fund. Monetary and
Capital Markets Department
http://www.federalreserve.gov/default.htm
http://english.mnb.hu/
http://duepublico.uni-duisburg-essen.de
http://onlinefx.westernunion.com

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