The political situation has not become any clearer now that the referendum might be invalidated by the Constitutional Court and Traian Basescu might resume his presidential duties despite the 7 million Romanians who voted for his suspension.
The domestic currency will therefore remain under a huge pressure considering the turmoil on the international financial markets, analysts say, who expect the leu to exceed 4.5 units against the euro by yearend.
Turmoil on the forex market calmed down for a short while right after the referendum and the leu had managed to spectacularly regain the ground it had lost for ten days. It reverted to depreciation over the last two days while prospects for the coming months are hardly encouraging.
Raiffeisen Bank analysts have revised the forecast for the second time in just a few weeks and are now seeing the leu at 4.65 against the euro in December. Their previous forecast had been RON4.4/EUR.
The leu turned out to be quite resilient to international shocks over the last few years, and was much more stable than the other currencies in the region, but has lost almost 5% against the euro since May because of the domestic political crisis overlapping with European turmoil. A stability factor for the exchange rate used to be the interventions of the central bank (BNR) on the forex market, which have been quite rare lately.
Citibank analysts expect political tensions to keep leu depreciation pressures high and see the leu 4.5 units against the euro at the end of year, taking into account an improvement of the political situation after the elections in the fall.
Melania Hancila, Volksbank’s chief economist, expects the leu to gain even more on the euro and end the year at 4.4 or 4.5 if the political situation stabilizes after elections.
BCR, Romania’s largest bank by assets, sees the leu at 4.5 units against the euro at the end of the year, while ING Bank is more pessimistic and expects it to reach 4.6 against the euro.
The central bank announced an official exchange rate of RON4.5885/EUR on Wednesday, higher than the day before for the second day in a row. The decline on Monday is believed to be due to a significant order placed on the market, which made a number of foreign investors close their positions. Some dealers even said they would not rule out an intervention by the central bank, either.
(English version by Loredana Fratila-Cristescu)