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Nov 10, 2009 18:07 EEST
November 10 (SeeNews) - The Romanian leu ended little changed against the euro on Tuesday amid low volumes and calm trading, dealers said.
The leu ended at 4.2975/2985 per euro, compared to 4.2950/3000 per euro on Monday.
"The leu opened at 4.2970 per euro and was trading around 4.2960-2990 per euro the whole trading session, which was very calm today. I saw no big players on the market today and trading volumes were very low," one dealer told SeeNews.
"Trading volumes in the FX market remain at a low level, while the presence of non-resident players is very moderate. The prolonged political turmoil has not yet had a strong impact on the effective exchange rate," Raiffeisen Research said in its weekly Focus FX forecast on Tuesday.
Political uncertainty has been high in Romania following the fall of the country's minority government in October and the rejection of prime minister-designate Lucian Croitoru's cabinet by parliament last Wednesday. Two days later, Romania’s President Traian Basescu nominated the mayor of one of Bucharest districts, Liviu Negoita, as prime minister-designate.
According to analysts, Negoita who is member of ruling Democrat-Liberal Party, has slim chances of winning approval for his cabinet in parliament, where the opposition controls two-thirds of the seats.
Due to the political turmoil, the International Monetary Fund suspended last week Romania’s economic review under a stand-by arrangement with the European Union member state, and postponed its third loan tranche until the country has a stable government in place.
"We think negotiations with the IMF could be successfully completed in the second half of January at the earliest. Until then, uncertainty should persist and this could have a negative impact on the leu," Raiffeisen Research said.
Raiffeisen Research added that recent developments have increased expectations of additional depreciation for the leu. It adjusted its exchange rate forecast higher to 4.30 per euro for March.
In December and January, Raiffeisen Research sees risks of an even weaker leu, taking into account that some more time has to pass until a new government can be established and until the 2010 budget draft can be approved.
Romania’s central bank, BNR, set its reference exchange rate at 4.2961 lei per euro on Tuesday, compared to 4.2968 on Monday. For the U.S. dollar, the BNR set its reference exchange rate at 2.8623 lei versus Monday’s 2.8655.
Turnover on the interbank leu deposit market rose to 3.139 billion lei on Monday from 2.881 billion lei on Friday. The BNR will issue Tuesday’s turnover figures on Wednesday.
Interest rates on overnight leu deposits fell to 8.37%/8.87% on Tuesday from 9.64%/10.14% on Monday.
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