One day after deciding to increase the amount of cash raised from the monetary market, the central bank did just that. The NBR absorbed 6.25bn RON (1.7bn euros) through a three-month deposit certificate, at an average interest of 5.98%, an increase of 1.64 points from the previous auction in October.
The maximum interest rate accepted was as high as 7.45%, which is very close to the 7.5% monetary policy interest rate reconfirmed by the NBR''s Board of Governors on Wednesday. The sudden generosity of the National Bank has pushed many players to sell euros in order to invest in RON, taking advantage of the new interest rate. This drove the euro exchange rate down by 407 ROL, to 36,267 ROL/EUR.
Even though the central bank has not officially signalled an interest rate increase, this is what actually happened: prior to yesterday''s operation, the average purging interest rate had gone down to less than 4% a year, that is 3.5 lower than the monetary policy interest rate. It is precisely this gap that allows the NBR to increase the interest rate used for its interventions on the market, without formally signalling a strengthening of the monetary policy.
This time, things happened very quickly: the same evening when the meeting of the NBR''s Board of Governors, dedicated to reviewing the monetary policy, took place, the central bank released the decisions adopted, including the use of all the instruments at its disposal. One of these instruments is the increase of the volume being purged from the market, to offset rising inflationary pressures. When they got to work yesterday morning, bankers already had on their desks a clue regarding the NBR''s change of attitude. This was quick to materialise in both the increase in the amounts purged and in the rate. Raising such a significant amount, 6.25bn RON, a figure that is substantially higher than the planned 5bn RON, and at a rate considered surprisingly high, represented a powerful enough gesture for the market to think in terms of a rebound of the short-maturity rates.
As a result, many players did not hesitate to sell euros in order to invest in RON in light of the new yields offered by the NBR, which are far more generous than those seen in the last six weeks.
Under the circumstances, the forex market yesterday opened with quotes below those at Wednesday''s close - 3.6600/3.6650 RON/EUR. Shortly afterwards, sell orders had pushed the exchange rate even lower, to 3.65 RON. The fall continued to 3.6250/3.6300 RON/EUR.
At this level the number of sell orders decreased and the quotes remained stable until the session closed.
Dealers say that the volumes traded were slightly higher than in the previous days, yet were nothing extraordinary.
The decrease in quotes was mainly due to the lack of interest in buying, they added.
On the other hand, the market had already started to feel that anything more than 3.67 RON/EUR would provoke an interest in selling.
Therefore yesterday''s move came as a continuation of the trend that started on Tuesday, when the rate went down by 0.0151 units. razvan.voican@zf.ro
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