The euro could climb to a level of 3.5 RON, or even higher, over the coming period, but what direction the exchange rate will follow afterwards remains unclear.
After the RON/EUR exchange rate advanced by around 4% since the start of the month (amid global risk aversion doubled by unfavourable domestic news) analysts consider there could be further declines. However, several opinions also indicate a correction of this trend as the end of the year approaches.
"The market may take the euro to levels of 3.6 RON, but I believe the exchange rate will return to 3.2 RON (per euro) towards yearend amid escalating financial flows," explains Florian Libocor, BRD-SocGen chief economist. He also takes into account the rising attractiveness of emerging economies, which continue to offer substantial yields, whilst US and major European economies are clearly slowing down.
BCR's chief economist, Lucian Anghel, also believes November could bring surprises, because, traditionally, this is a month when the exchange rate falls, whilst the impact of piling-up data on worsening economic indicators is also apparent.
Raiffeisen Bank's chief-economist Ionut Dumitru believes downside pressures will continue given investors' increased scepticism towards the RON compared to other regional currencies.
For the moment, Raiffeisen analysts have a 3.3 RON/EUR rate forecast for the end of the year, but announced they would modify it if the RON declined and projections became "too upbeat".
UniCredit analysts also maintain a fairly optimistic forecast for the time being: 3.32 RON/EUR in December.
Although UniCredit forecast RON depreciation next year, the pace is expected to be much slower, with the exchange rate expected to climb to 3.34 RON/ EUR in December 2008.
ABN Amro Romania analyst Catalina Constantinescu foresees strong exchange rate volatility, but anticipates RON growth amid foreign currency transfers in the last part of the year.
However, Constantinescu does not rule out a potential deeper decline, to 3.5 RON/EUR. "(...) What might temper a possible decline would be expectations of an NBR rate hike," said Constantinescu.
Otilia Ciotau, Piraeus Bank chief economist, expects the euro to reach the 3.5 RON level as late as the end of this month, when data on Q3 GDP trend, (probably disappointing) will be published.
The economic environment will further crimp confidence in RON, whilst ongoing global risk aversion will put further pressure on RON/EUR rate increases, believe ING Bank analysts in their turn.
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