Leu hits four-year record low

The local currency plunged below the RON 4/€1 yesterday, and analysts are predicting further depreciation, with the next threshold at RON 4.2/€1. Yesterday’s depreciation comes one day before the National Bank of Romania (BNR) makes a decision on the key rate. If this is reduced, the leu could plunge even further. However, most analysts are expecting BNR to maintain the current 10.25 percent key rate and say that the depreciation of the leu was mainly due to speculative operations on the currency market. According to Narcis Noaghea, dealer for Banca Comerciala Romana (BCR) lender, “the dynamic of the leu was determined mainly by the fact that the market had no significant [currency] volumes, and what happened were strictly speculative operations.” The exchange rate published by the central bank was RON 4.0296/€1, the lowest level for the local leu since 11 November 2004, while its rate for the dollar was RON 2.9427/$1. “What happened today on the currency market is not something new that distinguishes itself from the previous days. Last week, the euro even traded at a RON 4.11/€1 peak on the interbank market,” said a Senior Economist of ING Bank Romania, Vlad Muscalu. “We estimate that further depreciation for the leu will follow and that the exchange rate will reach RON 4.2/€1 in the first quarter of this year,” Muscalu added. Most analysts agree that the RON 4.2/€1 threshold will be reached in the coming months. Furthermore, some analysts are expecting consecutive key rate cuts, which could lead to further depreciation of the national currency. “The depreciation of the leu is natural and will continue. If the average depreciation was 10 percent against the euro last year, a similar drop in 2009 could be considered even in a moderate scenario,” the Research Manager of the Applied Economy Group (GEA), Liviu Voinea, said. (C.C., D.D)