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March 29, 2023

Romanian currency sinks, driven by political impasse in Greece

The Romanian Leu opened the week at a record low against the European currency –RON 4.4373 for one euro. Analysts estimate that, until elections, the exchange rate will not drop under 4.4 RON/EUR.

The National Bank of Romania (BNR) yesterday announced a new record low for the reference exchange rate, at 4.4373 RON/EUR, although the Romanian currency exceeded 4.44 RON/EUR in mid-day trading, as dealers say that the Central Bank did not intervene of a visible manner in the market. The previous historic low was reached Friday, at 4.4265 RON/EUR, so the exchange rate is higher by 2.7 pc. The RON also continued its plunge against the US dollar, as the exchange rate advanced by 2.7 Ban (RON 0.027), to 3.4479 RON/USD, representing a peak after July 1st 2010, when the reference exchange rate was 3.5420 RON/USD. The quotation of the Swiss franc soared to 3.6 RON/CHF, which represents a new peak after 5 September 2011, when the Swiss currency was quoted at RON 3.8133. Many banks already sell the EUR for RON 4.5. On the monetary market, very short term interests went up against the previous trading session. In the first part of the day, BNR posted an average interest rate for overnight deposits attracted by banks (ROBID) of 3.78 pc a year, up from 3.66 pc in the previous session, while for overnight deposits lent by banks (ROBOR) the average interest rate increased to 4.28 pc a year, from 4.16 pc in the previous session.Across the region, currencies lost about 0.8 pc, after talks in Greece aimed at forming a new ruling coalition met another obstacle Sunday. Investors’ fears about Greece leaving the euro zone reignited, as the Greek state might be forced to hold new parliamentary elections. “These are moments when new thresholds are tested, and I believe it is a matter of hours until transactions start being conducted at 4.5 RON/EUR, even if this does not suit the Central Bank momentarily,” a dealer said for HotNews.ro

Central bank Governor Mugur Isarescu yesterday discussed on the phone about the new record low reached by national currency with PM Victor Ponta, who told him that the government is ready to take all the measures necessary for any kind of problem which might appear at European scale, with this regard, Mediafax reports. “The government will coordinate its actions with those of the National Bank,” PM Ponta assured. However, he did not disclose any other details than the public announcements made by the Financial Stability Committee.Meanwhile, the European single currency Monday reached a four-month low against the US dollar on markets in Asia, driven by the political turmoil going on in Greece, where political leaders were unable to form a ruling coalition. The EUR thus dwindled to USD 1.2877 on Asian markets – a new low after January 23.

Vasilescu, BNR: there is no reason to panic

Romanians have no reason to panic over the devaluation of the RON experienced these days, according to Adrian Vasilescu, counselor to the governor of BNR. “The foreign exchange market is stabilised and BNR struggles to keep it stable,” Vasilescu said on RFI. During the same interview, the counselor said that the Central Bank is not very worried about the situation of the Romanian subsidiaries of Greek banks, because “these banks from Greece are Romanian banks with Greek capital; they operate within our banking system, under BNR monitoring, they are regulated by BNR, their management is directly controlled by BNR and, in an extreme situation, BNR also has the mechanism to lapse the voting right, at least, and the decision of the mother-bank in Greece.”The exchange rate will not drop under 4.4 RON/EUR neither in the first half, nor in the third quarter of the year, because of political factors, believes Vlad Muscalu, chief-economist of ING Bank, quoted by the Capital magazine. For the end of the year, the analyst anticipates an appreciation of the Romanian currency to 4.35 RON/EUR. In his turn, the chief-analyst of Unicredit Tiriac Bank, Dan Bucsa sees the exchange rate holding steady around 4.4 RON/EUR, as long as exports remain weak, after which the RON will slightly appreciate.

More expensive petrolIf the RON continues its depreciation against the USD, the risk of fuel getting more expensive will increase. According to INS, in the first four months of the year, the fuels sold on the Romanian market suffered an average price increase of 3.58 pc, while the general index of consumer prices only advanced by 1.49 pc. In April against March, the price of fuel increased by 0.57 pc, against an average inflation rate of just 0.07 pc. The spot price of Brent crude – the benchmark in London – diminished by 0.65 pc last week, to 110.40 USD/barrel at the end of last week, down from 111.12 USD/barrel at the beginning of the year. Over the same interval, the USD/RON exchange rate advanced by 3.01 pc, from 3.3208 to 3.4209 RON/USD.

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