Romania's central bank says exchange rate is 'within a range of balance'

Asked whether the local currency RON (leu) is still overvalued, the governor of the National Bank of Romania (BNR), Mugur Isărescu, said in the press conference on the Quarterly Inflation Report on May 20 that the national currency is "within a range of balance."

The mid-day exchange rate announced by BNR on May 20 marked a 1% depreciation of the local currency versus the euro – after the country's currency strengthened significantly on May 19, immediately after the win of the pro-EU presidential candidate Nicusor Dan.

Romania's currency has crossed the threshold of RON 5 to EUR in the weeks before the elections, reaching a depreciation of roughly 2% as of now (RON 5.085 to EUR) compared to the prevailing value in the months before the elections.

BNR governor Isărescu argued that the central bank will defend the local currency from falling behind a certain threshold since the currency is still subject to a [managed] floating regime.

He also said that BNR had prevented excessive strengthening of the currency over the past years since the autumn of 2024 by sterilising the forex inflows. Even so, the local currency strengthened by some 5% in real effective terms during 2024.

Isărescu explained that if the surplus currency had not been taken from the market [over the past years], the exchange rate would have dropped [currency would have strengthened] to RON 4.4 - 4.5/EUR, after which it would have depreciated.

In this context, Mugur Isărescu gave as an example the evolution of the forint and the zloty, specifying that he did not accept such a situation after the experience [of steep appreciation followed by deep depreciation] in 2007 - 2008.

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