The leu closed at 4.487/4.489 per euro, higher from 4.495/4.496 per euro in the previous day.
Romania’s central bank Wednesday cut the key monetary policy rate by 25 basis points to a record low of 3.75%, in a move aimed at restarting a sluggish lending activity. In the same time, the bank lowered the minimum reserve requirement ratios to 12% for the leu-denominated liabiities, from 15% before, and to 18% for the foreign-currency liabilities, from 20% currently.
”The extent of the monetary easing exceeded our and market expectations–while market expected a 25 basis-point cut in key rate, we bet mainly on a reduction of leu minimum reserves,” Erste said in a short note.
According to the bank’s analysts, the reduction of leu reserves will free up around RON3.5 billion into the market, while lower foreign currency reserves will improve forex liquidity by around EUR400 million.
The leu opened at 4.5/4.503 to the euro, from 4.495/4.496 to the euro at Tuesday close, but it traded below the 4.5 mark in early session. After the central bank announced its decisions, the leu extended its gains and touched the day’s high at 4.486 to the euro.
The central bank set the leu’s reference rate at 4.4979 per euro, slightly stronger than a six-month low of 4.501 per euro in the previous session.
Against the US dollar, the leu’s indicative was down to 3.3106 units, the lowest level since November 14.
In the money market, overnight rates were at 0.7%-1.2% a year.