Euro, Dollar, or Forint?

Hungarian investors live in a special situation: all their income arrives in forints, and their everyday expenses are also paid in forints, yet when they start building savings, they practically cannot avoid stepping out of this environment. The most important investment tools of the global market, such as ETFs or stocks, are available almost exclusively in euros or dollars. This makes many people feel uncertain, although in reality it is not a disadvantage but rather a distinct advantage if someone understands how the value of their savings is connected to the currencies in which they hold them.

The invisible currency of everyday Hungarian life

At first glance it may seem that the forint is our natural environment. Our salary, the supermarket, fuel, utilities — everything is tied to the forint. However, the Hungarian economy is fundamentally import-oriented. The phone we speak into, the car we drive, the fuel we buy, many of the services we use, and even part of the food we consume, all follow pricing that is directly or indirectly tied to the euro or the dollar. This means that if the forint weakens, almost everything becomes more expensive — and this often happens much faster and much more noticeably than the official statistics suggest.

The Hungarian investor therefore lives in a strange dual world: they earn in forints, but in reality they consume in euros. This duality also determines which currency is worth using when building savings.

How does the forint’s exchange rate move the value of a portfolio?

When someone holds their investment in euros or dollars, two forces determine its value expressed in forints. One is the performance of the asset itself — the ETF that rises or falls. The other is the currency exchange rate, which either strengthens or weakens against the forint.

If, for example, a euro-denominated ETF rises and at the same time the euro strengthens against the forint, the investor receives returns from both sides at once. If, in a weaker market year, the ETF stagnates or declines but the forint weakens, the currency effect can partially or fully compensate for the market loss.

However, the essence is not the short term. Annual exchange rate fluctuations sometimes help and sometimes hinder, but the long-term trend is clear: for decades the forint has been slowly yet continuously losing value against both the euro and the dollar. This is why, in the long run, a portfolio held in foreign currency is much more of a shield than a risk.

The advantages of a euro portfolio — the natural direction for the Hungarian investor

Due to the economic weight of the euro, the euro-based nature of Hungarian consumption, and the proximity of the EU, many investors consider the euro the most straightforward currency. Saving in euros is not speculation but an adaptation to the fact that a large part of our life’s expenses are linked to this currency.

Because of the euro’s stability, the economic strength of the EU, and its protection against domestic inflation, it is far more predictable than savings held in forints. This is why a significant portion of the Hungarian FIRE community builds its core portfolio — especially on TBSZ accounts — almost entirely in euros.

Its disadvantage is that its forint value can fluctuate in the short term, or that it can sometimes feel like an expensive entry point. However, the long-term trend has always moved in the safer direction: the forint has weakened, while the euro has remained stable.

The role of the dollar portfolio — more than American dominance

The dollar represents another dimension. It is backed not only by the economy of the United States but also by the world’s largest corporations, the centers of innovation and technology, and the majority of global commodity trading. The weight of the American market is so great that without the dollar it is practically impossible to build a truly global portfolio.

Dollar-denominated investments are especially beneficial for those who believe in the long-term strength of the technology sector or who want to diversify alongside the euro. The dollar is also traditionally a safe-haven currency, making it particularly valuable in times of crisis.

Its downside is that most Hungarian expenses are not tied to the dollar, making it a less natural base currency than the euro. The HUF/USD exchange rate may also be more volatile, causing stronger short-term swings.

The role of currency on the FIRE journey — help, not hindrance

Many people believe that currency exchange rate risk makes FIRE more difficult, but in reality it actually supports it. FIRE is a long-term game: we think in horizons of 10–30 years. Over such time spans, currency fluctuations no longer pose a danger but act as a kind of filter that smooths out the volatility of the domestic economy.

The growth of the global stock market and the strengthening of major currencies together make savings more stable. If the forint weakens — which is historically common — the value of our portfolio increases. If the market struggles but the currency strengthens, the loss decreases. In FIRE this is particularly important, because managing drawdowns is a key factor.

Saving in foreign currency therefore clearly supports the FIRE path rather than hindering it.

Should we keep anything in forints?

The answer depends on what the money is needed for. If someone is planning to buy a home, change a car, or cover a large expense within a few months, then yes, it is worthwhile to keep the necessary amount in forints for the short term. It is equally reasonable to hold forints if the investment has not yet been made but will soon be placed into a TBSZ account.

For long-term savings, however, the forint is a weak foundation. Its purchasing power continuously declines, it is worth less and less compared to foreign currencies, and it provides no protection whatsoever for the portfolio against economic fluctuations. In this respect the forint represents the risk side, while the euro and the dollar point toward stability.

Is it worth choosing another currency once we step out of the forint?

The question sometimes arises whether the pound, the Swiss franc, or the Japanese yen could be good alternatives. These currencies are indeed stable, and important actors of the world economy are tied to them, but they do not align as well with the real-life situation of a Hungarian investor. Our expenses are not tied to these currencies, and most investment opportunities are not built on them either.

Practical experience shows that the cleanest and most logical solution remains the combination of the euro and the dollar.

Summary — currency is not an enemy but a strategic advantage

For the Hungarian investor, a portfolio held in foreign currency is not an extra risk but a kind of modern safety belt. The euro protects the value of everyday expenses, while the dollar provides global growth and technological weight. Because of the forint’s long-term weakness, these together create a level of stability that is particularly necessary along the FIRE journey.

The euro and the dollar are therefore not distant monies, but everyday tools that ensure our savings not only grow nominally but also retain their real, international value. For the Hungarian investor, foreign currency is not an enemy but a strategic ally.