Leu faces hectic week

The Romanian currency is expected to continue to weaken this week. The depreciation of the leu was tempered in the first part of Friday’s session, closing at RON 3.7280-3.73/€1, following a high of €3.7580/€1, against a backdrop of a market with high transfer volumes and in keeping with emerging currencies. At session opening, the exchange rate was RON 3.7220-3.7020/€1.

“Players have dropped emerging currencies and the dollar to buy euro and yen, believing these to be refuge currencies,” said a bank dealer. The exchange rate fluctuated from a low of RON 3.7150/€1 to a high of RON 3.780/1€. According to the dealer, transferred volumes and volatility were high on the interbank market, and non-residents predominated.

The national currency could depreciate this week against the euro, due to unfavorable inflation results.

The National Institute of Statistics (INS) published data on Tuesday regarding inflation in February. Economic experts anticipated inflation worth 0.8 percent for February, a level similar to that for January. The average estimate by bank analysts indicated annual inflation for February at 8.1 percent, due to higher prices for gas, which puts pressure on BNR to again raise the monetary policy interest rate. Most economists are expecting intervention to rise to 9.5 percent by the end of March. Theoretically, the leu should appreciate against the euro, following a rise in the key rate, but unfavorable sentiment among investors could hamper such a move. Furthermore, the National Prognosis Commission (CNP) has revised the prognosis for the exchange rate for 2008, with the national currency being quoted down.

The average exchange rate for this year will be RON 3.55/€1, while the estimate presented in the preliminary CNP spring prognosis put the Romanian currency at RON 3.3/€1 in 2008.