Against the US dollar, the leu’s indicative fell 0.46% to 4.3105 units.
According to an ING report published Wednesday, the EUR/RON buying frenzy continued and found little resistance even after it traded through the upper end of the central bank’s perceived “stability zone”.
“We noticed that this year, the NBR governor was suggesting that the EUR/RON range shifted a bit higher from 4.38-4.54 previously. In the latest Inflation Report, the governor mentioned the 4.44-4.54 range a couple of times, without expressing a preference for it, but still highlighting low EUR/RON volatility within a 3% interval. The governor mentioned that he sees limited room, if any, for RON strengthening due to competitiveness erosion, backing his view with a chart showing that domestic companies have already lost internal market share in favor of imports,” ING notes.
According to ING specialists, this is at odds with EC surveys showing that manufacturers’ competitive position in the domestic market reached a post-crisis high in 1Q17, on a four-quarter rolling basis.
“We expect the EUR/RON to trade within a 4.49-4.54 range at least in 1H17, but we reckon that today is an important test of the NBR’s willingness to redraw its ‘lines in the sand’. Recent wage hikes, especially of the minimum wage, being decoupled from productivity gains, raised competitiveness issues. As such, the NBR might be inclined to move its ‘comfort’ EUR/RON range higher, maybe to 4.50-4.60, in a gradual shift towards supporting growth. Today, we might see a first test of this scenario,” ING report reads.