National currency – free falling

BNR exchange rate up to 4.5290 RON/EUR, reaches new peak of last six months. Central Bank’s decisions on relaxing monetary policy on Wednesday seem to have triggered the evolution.

The Romanian currency continued to devaluate, as the National Bank of Romania (BNR) yesterday announced a reference exchange rate of 4.5290 RON/EUR, which is a new peak for the last six months. A higher exchange rate of 4.5340 RON/EUR was announced by the Central Bank on 20 June 2013. The maximum of last year was 4.5535 RON/EUR, announced on June 7, Mediafax reports.
The RON initially appreciated Wednesday, against the background of the relaxation of BNR’s monetary policy, but the evolution was corrected following the statements made by the Central Bank governor. “He considered as <<normal>> the 5 pc variations of the RON around current values, also mentioning that he rather fears the lack of the devaluation potential of the RON following the recent measures. (…) In brief, we believe that the significant decisions made yesterday (Wednesday) and the tolerance to volatility suggest that BNR is not worried about possible strong pressures on the RON. However, our forecast regarding a strengthening of the local currency on short term has been tempered, because the respective oscillations occurred on significant volumes, which suggests a consolidation at current levels,” reads a report issued by ING Bank Thursday morning.
The Romanian currency also had a significant devaluation against the US dollar, with the reference exchange rate climbing to 3.3267 RON/USD, the highest level after November 11, when the exchange rate was the same as this Thursday. The reference exchange rate against the Swiss franc jumped from 3.6372 RON/CHF to 3.6616 RON/CHF.
According to dealers, the governor’s message was interpreted by the market in the sense that the Central Bank wants a higher exchange rate.
At the beginning of the trading session held Thursday, the exchange rate climbed above 4.5 RON/EUR, while at midday the local currency was trading near 4.53 RON/EUR. “Very short term evolutions aside, we maintain our positive forecast of the RON, due to an important growth of the GDP and to the attractive economic basics (the adjustment of the current account deficit, fiscal discipline and the return of foreign direct investments against the background of a positive perspective on economic recovery),” mentions the ING analysis.
The interest rates posted by commercial banks yesterday for overnight attracted deposits (ROBID) and extended loans (ROBOR) diminished from 0.68 – 1.18 pc to 0.57 – 1.08 pc a year. On the other hand, the interest rates charged by commercial banks are around the deposit facility of BNR, which stands at 1 pc per annum. The interests granted to one-week loans ranged between 0.71 – 1.21 pc p.a.The ROBOR interest for 3-month loans, which serves to calculating the interests for RON-denominated loans extended by banks on short and medium term, dropped from 2.16 pc to 2.1 pc p.a.

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