The Leu hits new historic low

The Romanian currency the Leu has hit a new negative record against the European currency.

Leyla Cheamil, 14.11.2017, 14:01

Despite the significant economic growth, the currency of Romania, the Leu, has been constantly losing ground to the European single currency. As of last week, the Leu has been reporting negative historic levels with every day that goes by. The National Bank of Romania set the exchange rate at 4.60 Lei for one euro, the lowest in the last five years and three months. On August 3, 2012 the central bank had set the Euro-Leu exchange rate at 4.648 Lei. What is behind this sharp depreciation of the Leu? National Bank spokesman Dan Suciu explains:

Dan Suciu: “The Leu ultimately reflects the foundations of the economy, the very elements underlying any economy, and we have hit the critical mass that led to a slight change of perception on the economy and implicitly on the Leu. One of the figures that confirm this trend is the trade deficit, the current account deficit, or simply put the balance between the countrys imports and exports.

Adrian Vasilescu, a strategy advisor with the National Bank, also tried to explain what exactly has been influencing the currency market. “Imports have gone up faster than exports, the gap is around €8 billion now and is estimated to grow to €12 billion by the end of the year, Adrian Vasilescu pointed out. “Who will make up for this difference? Shouldnt it be the exchange rate? This is the kind of pressure that the current account deficit exerts on the currency market and that the National Bank has been signaling repeatedly, the National Bank strategy advisor has argued. Will this depreciation trend continue? National Bank spokesman Dan Suciu is back at the microphone with more details:

Dan Suciu: “We dont know that. What we do know is that the Leu started depreciating compared to other currencies in the region a long time ago, and its advisable we take this difference into account when discussing regional tendencies. So the Leu has been going down for a while now, and were not sure if this trend will continue. We are witnessing a shift in the Leu-Euro exchange rate. For a long time the Leu fluctuated around the 4.4-4.5 mark. Right now we can see a clear shift towards a different level. Whether it will be 4.6 or higher, it remains to be seen.

The rise of the Leu-Euro exchange rate will also result in a spike of interest rates and prices. The National Bank of Romania estimates an inflation rate of 2.7% for the end of the year, higher than the initial forecast.

(translated by: Vlad Palcu)