Romania’s currency falls to fresh all-time low against EUR

The Romanian currency falls deeper against the European single currency on Friday as investors begin to be more skeptical about the local outlook and due to the fast deterioration of the trade and current account balance. The exchange rate rose by 0.2 percent to 4.7569/EUR, an all-time low, National Bank of Romania (BNR) data show.

Compared to the end of 2018, the RON lost 2.2 percent of its value.

On Wednesday, the reference exchange rate was RON 4.7569/EUR, also an all-time low.

On the forex markets, the RON was traded on Thursday, when the Romanian market was closed due to a local holiday, to 4.78/EUR, but recovered some of the losses today.

Analysts say RON’s depreciation is based on weaker outlook regarding Romania.

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“Given the relative lack of depth of the forex market, such movements can appear from few large international players’ trading activities. While it’s apparent also from other local assets’ underperformance that investors are beginning to be more skeptical about the local outlook, there is a also some fundamental rationale why RON should be weaker if we consider the fast deterioration of the trade and current account balance,” BCR chief-economist Horia Braun-Erdei said.

“In that context, even for the NBR a depreciation of 2-3 percent is not something that should be considered as contrary to its policy stance, however the central bank may indeed want to avoid getting into a spiral of depreciation-inflation-loss of confidence in Romania, so if this trend worsens they can get in the way,” he added.

Analysts point out that RON’s depreciation is far more important than in the case of other regional currencies.

Some analysts suspect speculative bets against the Romanian currency as the central bank has lower marge of maneuver due to a recent government decision to impose a money market rate-based tax on banks assets.

The RON is also losing value against other major global currencies. US dollar gained 0.4 percent to 4.2034 RON.

On Monday, the central bank tried to ease the pressure on RON through the second deposit tender in two weeks, of RON 4.3 billion, reducing the excess liquidity in the market.

Romania’s three-month money market rate (ROBOR), the main indicator that sets the interest rates for RON currency borrowers, rose on Friday to 3.11 percent, a 2-month high.