Romanian Leu Ends Weaker vs Euro on Negative Regional Trend

Market liquidity is no longer tight after the Romanian banks paid their minimum reserves with the central bank last week, one dealer told SeeNews. Investors also seem to have shifted their focus to the euro/U.S. dollar pair, dumping riskier emerging markets.

Romanian President Traian Basescu endorsed a law for a 50% hike in teachers' wages late last week, widely seen as posing macroeconomic risks to the EU newcomer. Also last week, Hungary's central bank raised its main interest rate by 300 basis points, from 8.5%, which was interpreted as a sign of crisis in Romania’s northwestern neighbour.

"The U.S. dollar appreciated strongly and there are signs it is being supported, unlike the European economy which seems to be performing less than well," the dealer said, adding that the recent suggestions by European Central Bank President Jean-Claude Trichet about possible eurozone interest rate cuts have pushed investors further in the direction of the U.S. currency.

"As a result, they have been buying euro from emerging markets such as Poland, Romania and Hungary to sell it for dollars on international markets," the dealer said.

Romania's central bank, BNR, set its reference exchange rate used for statistical purposes at 3.6869 lei per euro on Monday, compared to 3.6875 lei on Friday. For the U.S. dollar, the reference exchange rate was set at 2.9392 lei versus Friday's 2.9392 lei.

Interest rates on overnight leu deposits were set at an average of 14.01%/18.17% on Monday from 14.00%/17.80% on Friday.

Turnover on the interbank leu deposit market fell to 1.09 billion lei on Friday from 1.806 billion lei on Thursday. The BNR will issue Monday 's figures on Tuesday.

Following are Monday's average bid and ask quotes of commercial banks on Romania's interbank market. They were calculated at 11 a.m. (0800 GMT) by the BNR, based on data provided by 10 commercial banks (in pct):