December 9 (SeeNews) - The Romanian leu lost further ground against the euro on Wednesday in low volumes and decreased market volatility, as political uncertainty continued to weigh, dealers said.
The leu closed at 4.2475/2485 per euro versus 4.2350/2370 per euro on Tuesday. The currency closed at 4.2305/2345 on Monday.
"The trading was dull today, nothing interesting happened on the market. Volumes were low and volatility decreased," one dealer told SeeNews, adding that the uncertain political situation in the country was one of the reasons for calm market.
The leu closed at an intraday low of 4.2485 per euro and touched an intraday high of 4.2370 per euro today, the dealer said. She expects the leu to weaken further by the end of the week.
Romania's central bank, BNR, set its reference exchange rate at 4.2373 lei per euro on Wednesday, compared to 4.2249 on Tuesday. For the U.S. dollar, the BNR set its reference exchange rate at 2.8691 lei versus Tuesday’s 2.8489.
"Political uncertainty remains high and this may negatively affect the leu. Our leu exchange rate forecast largely takes into account such a situation," Raiffeisen Research said in its weekly Focus FX forecast. It sees the leu moving to 4.30 per euro by March next year.
On Tuesday, opposition Social Democrats asked the Constitutional Court to cancel the results of Sunday's presidential run-off vote over alleged fraud and to repeat the elections. The court has issued no ruling yet.
Final results issued by the Central Electoral Bureau, BEC, indicated that incumbent Traian Basescu has won 50.33% of the vote, while the PSD leader Mircea Geoana has come close second with 49.66% support. On Sunday evening, however, most local polling agencies gave Geoana a lead of 1.4-2.4 percentage points ahead of Basescu based on exit polls.
Delays in Romania’s new president taking office will mean a continuation of the political crisis in the country that has prevented the restarting of key reforms in the economy and justice system. Carrying out these reforms is the main condition for the release of the next installments of a 20-billion euro bailout package led by the International Monetary Fund (IMF).
"We have upgraded our RON view in light of the current firm FX control of the central bank but assume a similarly-shaped forecast profile going forward. Short-term weakening prospects stem from risks coming from the political scene," ING Bank said in its daily note. It sees the leu exchange rate at an average 4.24 per euro in 2009 and at 4.40 per euro at the end of March of 2010.
Turnover on the interbank leu deposit market fell to 2.197 billion lei on Tuesday from 2.667 billion lei on Monday. The BNR will issue Wednesday’s turnover figures on Thursday.
Interest rates on overnight leu deposits rose to 9.95%/10.45% on Wednesday from 8.71%/9.21% on Tuesday.