The National Bank of Romania (NBR) has made two interventions on the foreign exchange market to the tune of 600 million euros this week, central bank governor Mugur Isarescu revealed yesterday. The interventions on the domestic market were carried out only as part of the quantitative target for the foreign currency reserves of five months of imports.
Isarescu explained yesterday that the sudden exchange rate fluctuations such as those seen this week were necessary to "discourage" speculators. "We know that those coming in are making simple interest and exchange rate calculations, but we want to show them that sometimes they have to take into account that the exchange rate may fluctuate by plus or minus 10%.
"They know at what rate they are coming in, though nobody can tell them at what rate they, and possibly the Romanian bankers that play along them, will get out," Isarescu said.
He said that the central bank was even determined to make money from the exchange rate changes. "We want to make money off the exchange rate differences because we are a bank and have to secure a dividend for the people. The times when losses would stay with the central bank are over."
"The large-scale interventions on the market this week had two goals: assessing what we are facing and assessing the possible moves on the market. If the NBR buys, then it is as if speculative investors are getting out, so you can see how high the exchange rate can increase following massive investments. The move showed that if investors exit suddenly, then the exchange rate would offset their gains."
Isarescu explained that amounts as high as 5bn euros have nowhere to "go down" on the market. "We must not be panic. They want to come, but they will find it hard to do so."
The central bank estimates a current account deficit of 6.8-7% of GDP for this year, compared with the 7.7% of GDP last year (which includes the reinvested profits of foreign companies).
The bank is still watching the exchange rate, although it does not have definite exchange rate targets. "The purpose of the interventions has to do with quantity, with maintaining the optimal level of international reserves at five months of imports."
"The NBR will continue to intervene on the market, though less frequently and more predictably," Isarescu said yesterday.
Addressing the recent criticism directed at the central bank concerning its non-intervention policy on the foreign exchange market, Isarescu responded by referring to the law. "According to the NBR's operating law, we are under no legal obligation to maintain a specific exchange rate target, but to set the prices and an optimal level for international reserves."
Apart from the two main goals, there are also subsidiary objectives: maintaining exchange rate flexibility within a sustainable range; discouraging speculative inflows; and distributing the gains on the foreign exchange market as evenly as possible.
Isarescu reiterated the idea that there is no such thing as a predictable exchange rate fluctuation interval. "We won't be forced to assume a plus/minus 15% level sooner than in 4 or 5 years in order to shift to the euro. Until such time comes, the sustainability range can be wider," Isarescu said.
sorin.pislaru@zf.ro
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
