Midday FX: Presidential election results spark leu sell-off

The leu traded near 4.23 versus euro in the morning and remained weak throughout the day, plummeting to 4.5units/euro, on fears that political pressures are likely to persist with Traian Basescu still in office.

However, the leu started to gain ground modestly at noon to an official exchange rate of 4.22 lei/euro. At 13:25, banks were buying a euro with 4.2125 lei and selling it for 4.2225lei.

“The results that showed Basescu winning have sparked a sharp fall of the local currency. The news came as a surprise to the market that didn’t grasp it as positive. In addition, the aversion to the leu’s regional peers acted as a catalyst to the downward trend in the region”.

FX traders say the central bank intervened indirectly in the market at noon to counter a collapse of the leu, as a handful of large leu selling orders were lifting exchange rates in the first part of the day.

The benchmark exchange rates posted by the National Bank of Romania climbed 0.19% to 4.2141 lei/euro from the two-month low 4.2062lei/euro.

In the region, the forint fell from 268.25 to around 270 units/euro in the morning, and gained ground afterwards to 269.5 units/euro. The Polish zloty dropped from 4.045 to 4.08units/euro, and traded within a narrow band around 4.07units/euro.

Versus its US peer, the leu lost 1.85% at the official exchange rates, from 2.7931lei/US dollar to 2.8449lei/dollar.

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