BNR’s reference exchange drops again to RON/EUR 4.4978

The reference exchange rate announced by BNR has reached RON/EUR 4.4978, a new low of the last three weeks, which translates into a 0.93 percent depreciation of the national Romanian currency within the last four sessions, during which it has reported a tendency contrary to that of neighboring states. BNR announced a lower exchange rate at the second session of the year on January 6, when the euro was quoted at RON 4.4947. On the other hand, the leu suffered a slight depreciation Friday compared with the U.S. dollar, as the reference exchange rate went up by 0.75 bani (0.23 percent) from RON/USD 3.3146 on Thursday to RON/USD 3.3221.
The RON/CHF reference exchange rate dropped by 1.1 bani (0.3 percent) from RON/CHF 3.6870 to RON/CHF 3.6760.
In the last few days, the national currencies of emerging states have undergone significant depreciation as a result of many investors pulling out of emerging markets, but this has not impacted regional markets to a great extent. The leu became stronger in the last four days, while the zloty and forint have dropped relative to the euro. Consequently, dealers claim the central bank has indirectly intervened on the market by indirect sales in euro and purchases in lei, measures aimed at supporting the national currency, Mediafax reports.
“Just as we anticipated, the central bank continued to take aggressive measure to protect the leu yesterday, as the volumes traded yesterday are close to the all-time high and the national currency has strengthened, despite the regional trend, reaching RON/EUR 4.51. (…) We believe recent actions suggest the bank is determined to discourage speculations against the leu. Since the domestic currency has appreciated well beyond RON/EUR 4.50 this morning, for the first time after BNR’s decision on January 8 (editor’s note – to lower the monetary policy interest rate to 3.75 percent per year), it is very likely that the trend was also induced by shutting out trends that were against the leu; we expect this tendency to continue,” ING Bank analysts stated in an address issued Friday morning.
BNR’s indirect interventions on the market in the last few days have also influenced the interest rates of commercial banks, causing a visible increase above BNR’s monetary policy interest rate of 3.75 percent/year – a historical record – after almost six months.
Analysts: Central bank may lower key interest rate to 3.5 percent
The National Bank of Romania may lower the monetary policy interest rate from 3.75 to 3.5 percent at this Tuesday’s Board of Directors’ meeting on monetary policy issues, according to participants in an internal survey of the Financial and Banking Analysts’ Association of Romania (AAFBR). Thus, 15 out of 20 participants expect the interest rate to be lowered to 3.5 percent, whereas the remaining respondents believe the rate will remain unchanged.
This may be the last time in the easing of monetary policy cycle, which started in July 2013, when the interest rate is lowered. Most prognoses for December 2014 indicate a 3.5 percent interest rate and vary between a minimum of 3 percent and a maximum of 4 percent, an AAFBR press release notes.
Analysts also believe the minimum mandatory reserves for leu-denominated liabilities may remain stable at 12 percent in February, with the possibility of a drop to 10 percent by the end of the year. Prognoses for December 2014 range between a minimum of 5 percent and a maximum of 12 percent. Minimum mandatory reserves for foreign currency liabilities may remain stable at 18 percent at the next Board of Directors’ meeting, with the possibility of a drop to 15 percent by the end of the year. Prognoses for December 2014 vary between a minimum of 10 percent and a maximum of 18 percent.

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