On Wednesday, the central bank cut the key rate by 25 basis points, to an all-time low of 3.75%, and lowered the minimum reserve requirements for both leu and foreign currency denominated liabilities.
In a press briefing after the announcement, central bank governor Mugur Isarescu said the leu should depreciate after the bank’s moves, but the currency might lack the potential to do so. Also, he defined variations of 5% for the leu’s exchange rate as “normal.”
The leu initially gained some ground after the central bank announcement, which came as a surprise considering the amplitude of the monetary policy easing. But it switched trend soon after Isarescu’s comments, as investors interpreting the statement as a desire for a weaker leu.
The leu opened at 4.5 to the euro Thursday and continued to lose ground towards 4.53 to the euro by mid-session. The reference rate set Thursday is the weakest in the past six months.
The leu lost ground against the US dollar as well, with the exchange rate falling to 3.3267 units, from 3.3106 units on Wednesday.
On the money market Thursday morning, overnight rates fell to 0.6%-1.1% a year, from 0.7%-1.2% a year in the previous session.