Isarescu: I see the leu at about the level it should be

“Regarding the depreciation of the leu, on its knees, crushed, the slumping of the leu. This strong leu, whatever we want to call it. Out of curiosity, I checked to see where it was when we cut the zeros. It was in fact at 3.6. As such, I do not see it on its knees. I see this, as Ilie Serbanescu [Ed. n. Romanian financial analyst] said, at about the level it should be,” said Isarescu. The Governor of the National Bank of Romania (BNR) is estimating an average exchange rate in 2008, lower than that in 2007. “In reasonable terms, we realize that the average this year will be lower, compared to the RON 3,34/€1 average the year before. The leu has not yet been subject to a real correction, but probably will have one on its average in 2008. Probably, I am not sure,” added the head of BNR. The Governor also pointed out that the evolution of the leu is comparable to that of the forint or the zloty following Hungary and Poland’s accession to the European Union, and rejected the idea of a financial crisis.

A real correction of the leu could occur if the average nominal value of the leu in 2008 is lower than that in 2007, with a percentage equal to that of this year’s average inflation. The National Prognosis Commission (CNP) estimates average annual inflation in 2008 at 5.7 percent, above last year’s 4.84 percent level. Based on this same projection, if the leu were to reach an average exchange rate of at least RON 3.53/€1, this could mean that the national currency would suffer a real correction.

The average exchange rate on the interbank foreign currency market, calculated and communicated yesterday by the National Bank of Romania was RON 3.6349/€1, 26 units above Tuesday’s rate.