Investors close their positions on the leu, preferring safer assets

“Foreigners are closing their positions on regional currencies, preferring to place their money in much safer assets, such as oil, sovereign shares or gold. Furthermore, the oil quotation shows that the world economy is not in the best shape, and as such volatility could continue for a while,” according to an explanation for Business Standard by BCR Chief Economist, Lucian Anghel, one of the founders of the Romanian Association of Financial Banking Analysts. Anghel added that the aversion to risk in Romania is also linked to the macro context, and this year, our country must either quash the dangers regarding a high current account deficit and other economic problems, or confirm the optimism of those that trust in its performance. “What I can say is that in the short-run, we will not reach 4 lei to one euro. I repeat, in the short-term,” said Anghel.

The national currency depreciated by more than RON 0.04 to the euro to reach RON 3.79/€1 at the closing of yesterday’s session, due to persisting negative sentiment on external markets. Outside the international or regional contexts, there are sometimes other factors on the Romanian market that influence the leu, and which contradict the economic theory. “When the key rate rises, the leu should strengthen, but that does not seem to be happening, and people are buying foreign currency,” said Mirela Cadar, Senior Dealer with Banca Transilvania.

The national currency depreciated by more than RON 0.07 Friday due to high demand for the euro, following the depreciation of the leu by over 0.7 percent in February, with the rate at RON 3.7011/€1 on the last day of January. At the beginning of last month, the leu appreciated for a few days, and the lowest rate was on 4 February, when the Central Bank published a RON 3.6095/€1 reference rate.