Emerging Market Currencies Witness Volatility: Hungarian Forint Surges, Indian Rupee Hits Record Low

In December 2025, emerging market currencies exhibited significant volatility, drawing global investor attention. The Hungarian forint appreciated approximately 20% against the U.S. dollar, while the Indian rupee depreciated to a record low of 90.74.

The Hungarian forint strengthened to levels not seen since December 2023, reaching HUF 380.2 per euro and HUF 326.4 per U.S. dollar. This appreciation is attributed to the Hungarian Central Bank's disciplined monetary policies and a currency-swap agreement between Hungary and the United States, signaling robust protection against external shocks.

Conversely, the Indian rupee fell to a record low of 90.74 against the U.S. dollar by December 15, 2025, surpassing the previous low of 90.55. This decline is primarily due to prolonged U.S.-India trade negotiations and consistent foreign outflows from Indian equities and bonds. Despite interventions by the Reserve Bank of India (RBI), the rupee weakened by nearly 6% year-to-date, marking it as Asia's worst-performing currency.

Several factors have contributed to these currency movements:

• Global Trade Reconfigurations: U.S. policies have led to a reconfiguration of global trade, impacting emerging market currencies.

• Geopolitical Risks: Ongoing geopolitical tensions have influenced investor sentiment and currency valuations.

• Divergent Monetary Policies: Differences in monetary policies between advanced and emerging markets have affected currency stability.

The International Monetary Fund has expressed concerns about market fragility, noting the concentration of foreign exchange activity among a few major banks. Emerging market currency trading has become particularly lucrative, generating nearly $40 billion in revenue for top global banks—double that from major G10 currencies.

The appreciation of the Hungarian forint may enhance Hungary's purchasing power and reduce import costs, benefiting consumers. However, it could also make Hungarian exports more expensive, potentially affecting the competitiveness of export-oriented industries.

The depreciation of the Indian rupee poses challenges, including increased import costs leading to higher inflation. Sectors reliant on imported goods, such as technology and manufacturing, may face higher production costs. Conversely, a weaker rupee could make Indian exports more competitive, potentially boosting the export sector.

The divergent paths of the Hungarian forint and Indian rupee highlight the multifaceted factors influencing emerging market currencies, emphasizing the need for nuanced economic policies and strategic international engagements.