The RON is 10% weaker than a year ago, while forecasts for the coming few months vary.
July, as in 2007, brings the prospect of an annual low, after the euro stands at an average of 3.59 RON three weeks into the month. The level is much lower than the previous few months' averages, which fluctuated between 3.64 and 3.72 RON per euro.
In July 2007, the euro reached a five-year low, after the monthly average fell to 3.13 RON per euro.
Whereas last year, the RON was one of the "best-performing" currencies in the region in terms of appreciation against the euro, now the picture is different. While the Polish zloty and the Hungarian forint are close to all-time highs, the RON has barely managed to dip towards the level reached at the beginning of January, and has benefited to a lesser degree from positive regional sentiment.
Exchange rates fluctuated within a very narrow band, between 3.54 and 3.55 RON per euro on the forex market yesterday.
"I expect the RON to see depreciation in the coming few months, due to the unsustainable level of the current account deficit, as well as to the excessively relaxed fiscal and revenue policies," says Nicolaie Alexandru Chidesciuc, senior economist at ING Bank.
According to his scenario, the euro should remain at 3.56 RON at the end of September, but the last quarter of the year would bring additional depreciation pressures. The ING economist even expects interventions from the NBR (National Bank of Romania) to protect the RON in the last few months of the year, which could bring the exchange rate up and near 3.65 RON per one euro by the end of December.
Raiffeisen Bank's analysts in Vienna also have conservative expectations as to the RON's trend.
"The volatility seen over the last few days shows that the fundamentals of the Romanian economy are still weak and cannot sustain the appreciation of the RON, as is the case for other regional currencies. They see the euro stabilising at 3.6 RON by September, but continuing to decline towards 3.5 RON until the end of the year.
Since the beginning of July, the exchange rate declined from 3.63 RON to a 3.52 RON-per-euro-low. However, this level remained valid only for a few hours, after the euro returned to 3.6 RON in the following few sessions and then fell again, but not by as much as before.
Compared with the average exchange rate in July last year, the first-three week-average indicates an almost 15% depreciation in nominal terms. Considering the at least 9% increase in the annual inflation rate in July, the real term depreciation of the exchange rate could be lower and stand at around 5%.
Although July has brought an unhoped-for appreciation of the RON against the euro, the market has much more reserved expectations than it did a year ago.
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