The euro could get back up towards 3.6 RON at the end of the year, if last autumn's scenario occurs again, driven by the significant purchases of foreign currency by importers.
The exchange rate stood at 3.6 RON/EUR in late October 2005. The last two months of 2005 came with a 2.5% increase for the euro, to 3.69 RON.
A similar trend now would have the euro go up from 3.51 RON at the moment to 3.6 RON.
Traditionally, the last few months of the year come with larger imports, both by energy suppliers, which build up stocks and more recently by retailers, which get ready for the holiday shopping frenzy.
However, a number of things have changed on the forex market since 2005. The euro was already following an upward trend last year, fuelled by NBR's monetary policy, which was trying to discourage inflows of speculative capitals. Now, the exchange rate has been stagnating since the end of July between 3.5 and 3.55 RON/EUR.
Analysts say that the RON's stability has been fuelled by the "market sentiment" rather than by the volumes actually traded.
Market (exchange) rates have fluctuated because of contagion over the last few months, with the RON moving in concert with the currencies in the region, rather than because of the transactions conducted. This explains the stability of the exchange rate, as the market could not find the strength to break out of the above-mentioned interval's boundaries.
"The RON has appreciated quite a lot compared with the beginning of the year. There have been customer shortages for almost the entire year, unlike last year, which should have normally led to a depreciation of the RON," says Ionut Dumitru, head of the analysis department of Raiffeisen Bank. He expects the euro to go up to 3.6 RON in the last couple of months of the year, or even exceed this level.
"The trade deficit has widened a great deal this year and the trend will continue over the next few months," Dumitru says. In his opinion, the increase in the demand for foreign currency from importers, set to overlap with the already significant deficits, will drive rates up.
Compared with last autumn, the volumes traded on the market have increased slightly.
The daily average of interbank operations last week was 147 million euros, from 140 million euros last October.
Operations with clients increased even further, from approximately 250 million euros a day to 350-400 million euros at the moment.
Florin Citu, ING Bank's chief economist is somewhat more optimistic; he believes the euro stands chances of going up towards 3.55 RON by the end of the year.
"This estimate might be optimistic, though. It depends on commercial flows," Citu says. He notes that interests are going up on the markets in the region, while the NBR maintains the RON interest rate at 8.75% a year. Under the circumstances, investments in RON are becoming less attractive to foreign investors. In the absence of foreign investors, the commercial customers will be the one setting the trend on the market.
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