The Romanian Currency at the Beginning of the Year

After a good year 2013, Romanias national currency, the leu, has made a bad start this year. In the last few days, the leu has depreciated as compared to the euro, on Tuesday exceeding the psychological threshold of 4.5 lei for one euro.

România Internațional, 08.01.2014, 13:17

2013 was a good year for Romania’s national currency the leu that had the best evolution of all currencies outside the euro zone as compared to the euro. According to a survey conducted by Noble Securities, one of the first brokerage companies in Poland, last year the leu registered the lowest depreciation of all EU currencies, standing at about 0.5%. In a recent interview to the independent channel Realitatea TV, Adrian Vasilescu, advisor to the governor of the National Bank of Romania underscored that the leu had been stable over the five years of economic crisis. He believes that the crisis would have been much deeper unless the national currency had been stable.

Adrian Vasilescu: “This is the sixth year since the crisis practically started in Romania at the beginning of 2009. Our currency market has been steady in position. If the currency market had collapsed, the crisis would have been more serious. Practically, we went through the crisis in conditions of financial stability and instability in a few macro and micro domains; hardly in 2013 did we have stability in the entire macro-economic spectrum”.

However, in 2014, the leu has got off to a poor start. As early as the first day of transactions, the Romanian currency depreciated as compared to the euro and the American dollar, reaching a record low for the last six months. On Tuesday, the leu reached the psychological threshold of 4.5 lei for one euro, a threshold it had not exceeded since last summer. In the last week, the currencies of the states in the region have also depreciated in the wake of the US dollar strengthening as against the euro on international markets.

Currency market analysts say that the slow but steady weakening of the leu in the last few days comes against the increasingly tense backdrop of the Romanian political scene. Political tensions between the presidency and the government and those within the Social-Liberal Union have had a negative impact on the economic environment, being indicative of instability for investors.

Adding up to this are also some external factors. One of them is a possible decision of the Federal Reserve System, which is actually the US Central Bank, to no longer keep the current levels of liquidity, which would entail a stronger US dollar and would reflect in the quotations of all emerging currencies, such as the leu. Experts expect the national currency to strengthen in the first half of the year, estimating an average exchange rate of 4.3 lei for one euro. It is a more optimistic forecast than that of the National Forecast Committee, according to which in 2014, one euro will be traded for 4.45 lei, a rate that was taken into account in the construction of the budget.