The euro continued to decrease against the RON yesterday reaching a low of 3.2780 RON/EUR on the forex market, after the NBR had calculated an exchange rate of 3.2841 RON. Analysts estimate the appreciation pressures could also continue into the second half of the month. They doubt, however, that the NBR will tolerate a decline in the exchange rate below 3.25 RON/EUR.
"It's a combination of circumstances caused by the fact that the Treasury has taken about 7 billion RON out of the system, which is money that has not been put back into the banks yet. A lack of RON is creating an impact on the exchange rate, though I'd be surprised if we see the NBR tolerate an exchange rate of less than 3.25 RON/EUR. The remedy to halt the appreciation is the feeding of more cash onto the market," Radu Craciun, chief analyst of ABN Amro Bank Romania told ZIARUL FINANCIAR. The euro had stagnated at close to 3.28 RON for most of yesterday's trading session, where it witnessed a decrease on Wednesday night. Analysts warn the low level of exchange rate is making room for corrections.
"The more intense the appreciation, the stronger the corrections," comments Lucian Anghel, BCR's chief economist.
The euro fell from 3.285 RON to 3.278 RON in the first half of the day in Bucharest, taking into account that foreign currency Sell orders were not matched by the domestic currency Sell orders.
"The RON has been out of synch with trends on the international markets over the last few days. The recent appreciation was caused by the low liquidity of the monetary market," explains Lucian Anghel.
Under the circumstances, the NBR organised a new auction yesterday to inject RON into the market, as it did on the last day of last week.
The amount injected stands at 3 billion RON, the exact amount that has to leave the market today, on the date of the auction held by the central bank last week. After the auction result was announced, the exchange rate increased slightly to 3.29 RON/EUR. The dealers were expecting an exchange rate correction yesterday, after the neighbouring markets had reacted to increased volatility on the financial markets in Turkey by contagion.
Lucian Anghel believes that we should expect a new high volatility of the RON/EUR exchange rate, as the monetary market will continue to put pressure on liquidity.
Last Friday, the NBR lent 3 billion RON to banks for one week, at an 8.46% interest a year, with government securities and other eligible assets pledged as collateral.
NBR offered again 3 billion RON at yesterday's auction, though the average interest fell to 7.6%. Only eight banks participated yesterday, and dealers think that was because of the lack of eligible assets (usually government securities) to be pledged as collateral for the loans.
Another 2 billion RON reached the monetary market yesterday, as a deposit previously attracted by the NBR fell due. Even with all these significant inflows, the short-term interests remained at more than 10% a year, significantly higher than the monetary policy interest of the NBR, 7.25% a year.
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