Romanian currency drops to lowest level in over four years

Romania’s National Bank (BNR) announced yesterday a reference exchange rate of RON 4.5538 per EUR. The European currency thus reached the maximum of the last four years and five months against the RON. The local currency leu hasn’t seen such a low level compared to the euro since October 2012. The central bank could move the “balance level” higher, to RON 4.5-4.6 per EUR, in an attempt to gradually support the economic growth, according to financial analysts. Up until recently, BNR has been trying to keep the exchange rate between RON 4.38 and RON 4.54 per EUR. The Romanian currency leu will see a gradual drop in the coming quarters, influenced by internal factors such as the higher current account deficit and the fiscal uncertainties, according to Erste Group analysts, reports local Digi24. However, external developments will have the biggest impact. The tightening of the monetary policy in the United States combined with political risks in Europe and a possible tougher line from the European Central Bank (ECB) could disadvantage the Romanian currency this year, the Erste analysts estimate. Romania’s National Bank (BNR) has been keeping a firm control of the exchange rate in recent years as many Romanians and local businesses had loans in euro and a sudden depreciation of the RON would have made it harder for them to pay back their loans, ultimately affecting the banks’ financial indicators. At the same time, the central bank encouraged commercial banks to increase lending in RON and tighten the rules for loans in EUR. editor@romania-insider.com