A number of exchange restrictions may have been relaxed in the run-up to OECD membership in 1996, yet the Hungarian forint still falls short of full convertibility. According to current exchange regulations, residents may only enter forint-related spot contracts in connection with certain types of payments and they are prohibited from entering forward and options contracts with non-residents.
Mainly due to these restrictions, the depth and liquidity of the Hungarian interbank forex market is still limited. Daily average trading volume is in the region of $400 to $500 million (excluding spot transactions with the central bank - the National Bank of Hungary (NBH). Unlike the Czech koruna, however, the forint market is mainly driven by domestic participants - be they banks, funds, corporates or private individuals. Nevertheless, the impact of foreign investors buying Hungarian equities and government bonds cannot be totally ignored.
As a consequence of semi-convertibility, a London-based offshore forint market has developed parallel to the domestic market, trading non-deliverable forwards and some forint options, whilst settling the transactions at maturity on net base in convertible currencies.
Despite the lack of total convertibility, the Hungarian financial industry has made great progress since July 1992, when the domestic interbank foreign exchange market commenced operations.