Analysts: Romania's currency to weaken but not more than 2.5% this year

Romania's currency nearing the level of RON 5 to EUR prompted comments from analysts, who, however, believe that the nominal depreciation is a natural effect of macroeconomic balances but will not exceed 2%-2.5% this year in nominal, annual average terms.

The currency strengthened from close to RON 4.9 to EUR in early February to near RON 4.98 recently.

The threshold of RON 5 to EUR will probably be crossed with the National Bank of Romania (BNR) likely to defend, if necessary, a rate of RON 5.1.

However, the CFA poll indicates that this will not be required since the polled analysts indicated an exchange rate of RON 5.03-5.04 over a 12-month period.

"The recent weakening of the RON was to be expected because the central bank implied that it did not agree with the previous strengthening trend by allowing excess liquidity to persist on the market in order to discourage carry trade transactions," commented Ciprian Dascalu, BCR chief economist, quoted by Economica.net.

However, Dascalu says that he does not expect the leu to weaken this year by more than 2-2.5% on average compared to the average of last year.

"We do not see anything unusual as regards the exchange rate, with the vast majority of forecasts (including ours) showing that a depreciation of the leu is expected," said Valentin Tataru, chief economist of ING Bank.

He added that variations of around 1% in the XR indicate the flexibilization (of the XR) rather than the depreciation of the currency. He sees the EUR/RON pair trading very close to the level of RON 5 to EUR.

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