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| WHAT’S IN STORE FOR THE ROMANIAN CURRENCY 09/01/2009 |
| (2009-01-09) |
| Last updated: 2009-01-12 17:27 EET |
Experts lay the blame for the fall of the national currency to values reported five years ago on the large amount of foreign currency purchased by foreign as well as local players. The latter are to pay these days the goods purchased from foreign markets in December. “The market has been restless these days, with transactions involving substantial amounts,” dealers say. As compared to early December 2008, the leu has lost about eight per cent against the Euro, and experts believe the trend will go on, given that depreciation pressures are strong and that the National Bank of Romania seems unwilling to attempt tighter control on the exchange rate.
The central bank’s governor Mugur Isarescu himself hinted that it could be a lot worse. “Do you think this is too much?” Isarescu asked on Wednesday, when announcing an exchange rate that took the leu to a new dramatic low for the third time this week. And prospects are hardly encouraging. Erste, a major financial group has released a report saying that the national currency is hardly at its best. According to the Erste report, quote, “currencies in Central and Eastern Europe have had diverse performances over the past few weeks, but volatility rates have been equal.
The most promising currency in the first quarter seems to be the Polish zloty. At the other end of the spectrum there is the Romanian leu, which may lose another 5 per cent against the Euro.” Unquote. This is primarily because of the current account deficit. Whereas in December the main danger seemed to be that the psychological threshold of 4 lei per one Euro would be exceeded, today questions focus on how long the downward trend would go on and why the central bank does not step in, as it did late last year. Experts expect the exchange rate to go up to 4.5 lei for one Euro, with a 4.2 lei average rate for the year. The central bank’s position may also be regarded as a diplomatic means of reducing macroeconomic imbalances, such as the large current account deficit.
Bankers are not the only ones alarmed by the decrease. Romanians are in for a series of price hikes, for any product or service calculated in keeping with the European currency. Any depreciation of the local currency against the Euro will also result in higher repayments for loans in the European currency.
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