October 15 (SeeNews) - Citibank said it expects Romania’s leu currency to end the year at 4.32 per euro, up from a forecast of 4.18-per-euro made in September.
“We expect euro/leu to be around 4.32 by year-end, which amounts to a real depreciation of over 10% for 2009. Our year-end forecast is predicated on the Romania’s central bank, BNR’s willingness and ability to keep euro/leu around 4.30,” Citibank said in a Macro View on Romania, issued on Wednesday.
The bank sees the exchange rate at around 4.25 lei per euro in the first quarter of 2010, at 4.20 in the second quarter, at 4.18 in the third quarter, and at 4.15 by the end of next year.
“Consistent with our expectations of a more stable political environment and less uncertainty regarding the implementation of the IMF [International Monetary Fund] programme by early next year, we look for a steady appreciation of euro/leu,” Citibank said.
The leu closed at 4.2900/2950 per euro on Wednesday, dealers said.
In late March Romania reached an agreement with the IMF, the European Union and the World Bank on a 20 billion euro ($29.8 billion) loan package aiming at backing its crisis-hit economy.
The bank said a rise in political uncertainty could undermine the implementation of the IMF programme and may hurt investor sentiment. This could, in turn, exert pressures on the leu until there is more clarity on the political front and on economic policymaking.
Romanian President Traian Basescu is expected to nominate a new head of government on Thursday after the country’s minority cabinet lost a no-confidence vote in Parliament two days ago.
“We acknowledge that failure to return to normalcy on the political front by early next year and large deviations from the economic programme’s fiscal targets are important risk factors to our FX forecasts,” Citibank said.
($=0.6709 euro)