The bank has revised its year-end forecast on the RON/EUR pair from 4.6 to the euro previously.
“Upcoming general elections and an administration that has lost significant support set the stage for rising political stress, but, as financial markets show, recent events have seriously exceeded most expectations. A continuing series of political scandals have suggested that rules in Romania are fluid and that political agendas override economic ones,” ING analyst Vlad Muscalu said.
The political upheaval has most likely affected Romania’s economic performance in the past months, which could increase the pressure in the financial markets, the bank noted.
“The market looks vulnerable to such a shock,” it said.
However, the central bank is expected to turn more aggressive in its actions to support the leu if the currency weakens too much, ING added.
“Still, there is probably a high hurdle before the central bank takes this action given it assumes that shifting the burden from the exchange rate to the interest rate means amplifying its impact,” the report said.
The leu traded at 4.536 to the euro around noon Tuesday, 0.8% stronger from 4.5715 per euro at Monday close.
Central bank governor Mugur Isarescu said Monday that the leu’s fall against the euro was unsurprising considering the recent political developments, saying that a depreciation of 2% to 4% is “reasonable.”