Fluctuations of the RON exchange rate may very well happen; the appreciation trend may change direction over a certain period of time. Even so, there still could be no talks of a "collapse" of the domestic currency, Governor Mugur Isarescu says in reply to all the public talks about an impending exchange rate correction.
"I keep hearing the RON is going to collapse because of some statement. If the rate moves by six bani (100 bani - 1 RON), that does not mean it depreciated," the head of the central bank said on the occasion of the 140th anniversary of the domestic currency.
He added that the currencies of the countries in the Central Europe had gone through times of appreciation followed by times when they lost ground, which was not that unlikely for Romania, either.
Bankers, analysts and, most recently, the interim president Nicolae Vacaroiu, have talked about the risk of a substantial correction of the RON, with their forecasts being proven wrong by the market thus far. Forecasts that had the exchange rate go down fast to less than 3 RON for one euro were similarly proven wrong.
"We're not saying this is the first time there is a possibility that the trend might reverse. I said it when the lending in foreign currency increased, so that customers could be warned. One must learn that you can get burnt if you play with the exchange rate," Isarescu explained.
This is not the first time the governor has dismissed public comments about the "depreciation of the RON" even at times when the exchange rate goes up by less than one percent, feeling the market should get used to the frequent fluctuations of the exchange rate.
"We're creating a psychosis if the RON lost 60 bani. The likelihood of an up-down move exists. A 2% variation is normal. There is no point in (sending) a signal that the RON will depreciate by 0.8% if we want to regard ourselves as a mature economy. The big problem of the economy is controlling inflation," Isarescu said.
Yesterday, on its birthday that is, the RON gained 0.74 bani against the euro, with the NBR calculating an exchange rate of 3,3300 RON/EUR. It also reached a six and a half-year high against the dollar, 2.4402 RON/USD.
With all the talks about the threat an increase in foreign deficit can pose to the RON, the governor likens the domestic currency to a "Finance Rocky", who does not think twice before "breaking the eyebrow of the dollar, as a friendly gesture." "It's back in about the tenth round, and has moved on to attack in the last two years. We still have six or seven more rounds because this is a 24-round match. The big battle was and still is stabilising prices."
After all, central bank vice-governor Cristian Popa says that the NBR is not expecting a sharp fall in the foreign direct investment, but on the contrary, a constantly upward trend over the next two or three years, which should support funding the foreign deficit.
The RON had entered a fortifying process, which is maybe going too strong, and was becoming the engine that is pulling ahead other sectors of the economy; the euphoria was most dangerous now and the RON should not be too lively now, NBR Governor Mugur Isarescu also said yesterday.
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