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October 4, 2022

Political instability takes RON to new historic low – RON 4.4715/EUR

As was expected, political rows directly affected the national currency, the National Bank of Romania announcing yesterday a reference currency exchange rate of RON 4.4715/EUR, the national currency thus registering a new historic low. Everything happened on a market on which the central bank intervened indirectly by selling Euros in order to slow down the depreciation of the RON, a depreciation caused by purchasing orders placed by foreign players against the backdrop of political tensions in Romania, Mediafax informs. The exchange rate posted is RON 0.0053 higher than the RON 4.4662/EUR level registered on May 24. At the same time, the exchange rate is RON 0.021 higher than the one posted on Tuesday (RON 4.4505/EUR). The RON’s depreciation against the EUR also influenced the official RON/CHF exchange rate which grew by RON 0.0193, from RON 3.7043/CHF to RON 3.7236/CHF. The exchange rate’s recent evolution reflects conjunctural external factors, the national currency’s depreciation coming against the backdrop of Euro Area turbulences, Finance Minister Florin Georgescu stated yesterday after the government meeting, adding that he lacks an “instrument” with which to measure exactly the effect of internal political factors.The exchange rate started to rise slowly in the second half of Tuesday, as a consequence of political tensions between PDL and USL. On Tuesday USL managed to replace the speakers of the two Chambers of Parliament, as well as the Ombudsman. The first transactions on the interbank market on Wednesday were made at an exchange rate of RON 4.4640 – 4.4540/EUR. Immediately after the opening, EUR purchasing orders placed by players from London raised the quotes to a high of RON 4.4720 – 4.4730/EUR. After that moment, several EUR sale orders were placed by several local banks, taking the exchange rate back down to RON 4.47/EUR. The capital market did not remain passive in the face of political developments, the Bucharest Stock Exchange dropping by 1.76 per cent at the opening of the trading day on Wednesday and by 2.1 per cent in the first half of the day, being also influenced by slight corrections registered by foreign stock exchanges. The market drop comes after five consecutive sessions in which the BET-C index grew by a total of approximately 7 per cent. The market did not react on Tuesday to the Parliamentary disputes between PDL and USL over the replacement of the Senate and Lower Chamber Speakers, however the reactions were seen on Wednesday morning when the quotes dropped. After the first 37 minutes of trading, the BET index of the ten most-liquid stocks was dropping by 2.1 per cent, while the stocks of energy companies were placing the BET-NG index 0.77 per cent below the level it registered on Tuesday. The market correction came within the framework of transfers featuring growing volumes, the operations totaling RON 2.8 M (EUR 635,000). The sum is approximately six times higher than the RON 479,000 (EUR 108,000) turnover registered at the start of the previous trading day.

Erste: Unprecedented actions at the borderline of legality

Erste analysts describe Tuesday’s political events as “unprecedented actions at the borderline of legality” whose apparent purpose is to impeach the President, however the Austrian bank’s economists maintain for the time being their estimates concerning the exchange rate and the state’s financing costs. The bank points out that it will continue to keep a close eye on political developments, however its exchange rate and state financing cost forecasts for the end of the year remain unchanged for the time being. For the end of this year Erste estimates an exchange rate of RON 4.45/EUR and a yield of 6.8 per cent for five-year bonds, up by 0.45 per cent from the current level. At macro level Erste points out that the growth of retail sales registered in May was due to the growth in consumer confidence and the retail sector will close the year with a growth of 2.5 – 3 per cent after three consecutive years of decline.

BNS: Political disputes driving investors away, affecting Romania’s credibility

In a communiqué signed by Dumitru Costin, the National Trade Union Bloc (BNS) is asking the Romanian President, the party leaders and the members of Parliament to urgently put an end to their savage power struggle that endangers democracy and the increasingly fragile economic and social stability and that is driving investors away. In BNS’s opinion, the entire costs “of this life-and-death struggle between political leaders will be paid by the population in the most concrete manner possible.” The National Trade Union Bloc accuses the entire political class of “crass lack of respect towards voters.”


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