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Romanian Leu Firms vs Euro Helped by Progress Towards Unlocking IMF Loan, Regional Sentiment

Dec 16, 2009, 6:25:12 PMArticle by Kristina Belkina
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December 16 (SeeNews) - The Romanian leu firmed against the euro on Wednesday helped by improved regional sentiment and the country’s progress towards unlocking financing under a stand-by deal with the IMF, dealers said.

Romanian Leu Firms vs Euro Helped by Progress Towards Unlocking IMF Loan, Regional Sentiment

The leu closed at 4.2200/2225 per euro versus 4.2500/2510 per euro on Tuesday.

The leu was on appreciation trend in line with other currencies in the region on Wednesday, one dealer told SeeNews. He added that the progress achieved by Romania regarding a 20-billion euro bailout package led by the International Monetary Fund (IMF) also contributed to the appreciation of the local currency.

On Wednesday, the head of the IMF mission to Romania Jeffrey Franks said that the country will probably receive the third tranche of its 12.95 billion euro ($18.9 billion) stand-by loan from the International Monetary Fund in February. Franks added that the IMF will probably send an assessment mission to Bucharest in January.

Political uncertainty has been high in Romania since the fall of the country's minority government in a no-confidence vote in October. The country is currently governed by an interim cabinet. In November, the IMF said it would disburse no further tranches until the political situation in the country stabilises. The European Commission has also delayed the disbursement of a second tranche of aid to Romania, worth one billion euro, for the same reason.

On Wednesday, President Traian Basescu, who has to nominate a new Prime Minister these days, said he hopes a new government to be formed by Christmas. Basescu was re-elected president in a run-off vote on December 6.

"Once the political situation will normalize, the leu has some room to appreciate. […] If a new government would be established earlier, then the leu might be stronger than our baseline scenario assumes," Raiffeisen Research said in its monthly economic overview for Romania.

Romania's central bank, BNR, set its reference exchange rate at 4.2459 lei per euro on Wednesday, compared to 4.2513 on Tuesday. For the U.S. dollar, the BNR set its reference exchange rate at 2.9180 lei versus Tuesday’s 2.9238.

Turnover on the interbank leu deposit market fell to 2.836 billion lei on Tuesday from 2.868 billion lei on Monday. The BNR will issue Wednesday’s turnover figures on Thursday.

Interest rates on overnight leu deposits were up to 10.91%/11.41% on Wednesday from 10.85%/11.35% on Tuesday.

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