Romanian Leu Firms vs Euro, Unaffected by C-bank Rate Decision

The leu ended at 4.3000/3025 per euro, compared to 4.3050/3100 per euro on Monday.

The leu opened with upward momentum at around 4.3050/3080 per euro and then strengthened to an intraday high of 4.2980. Local players generated around 80% of the daily volumes, one dealer told SeeNews.

He added that BNR’s decision to keep its key interest rate flat had no impact on the exchange rate.

Romania's central bank, BNR, decided on Tuesday to keep its key interest rate intact at 8.0%.

BNR set its reference exchange rate at 4.3017 per euro on Tuesday, compared to 4.3047 per euro on Monday. For the U.S. dollar, the BNR set its reference exchange rate at 2.9376 versus Monday’s 2.9152.

Turnover on the interbank leu deposit market rose to 2.210 billion lei on Monday from 1.861 billion lei on Friday. The BNR will issue Tuesday’s turnover figures on Wednesday.

Interest rates on overnight leu deposits rose to 10.09%/10.59% on Tuesday from 10.02%/10.52% on Monday.

"Political instability may continue to weigh on the leu exchange rate at least until the presidential elections are over, at the beginning of December. Also, the outcome of the visit of the IMF [International Monetary Fund] mission, which is scheduled for this period, will have an important impact on the exchange rate," Raiffeisen Research said in its monthly forecast Focus FX on Tuesday.

A mission from the IMF, the European Union and the World bank is in Bucharest through November 9 for the second review of Romania's economic performance under its stand-by arrangement with the three international organisations.

"Under these circumstances, we think that the risks for the exchange rate dynamics are on the upside over the short term," it added.

Political uncertainty has been putting pressure on the leu since the beginning of October after the country’s minority government fell in a no-confidence vote. Romania is currently governed by an interim cabinet. The country’s parliament will vote on Wednesday on a new government line-up proposed by prime minister-designate Lucian Croitoru.