Will Euro hit 4.2 lei threshold?

Currency exchange rate is very likely to hit 4.2 lei/euro high in first quarter of 2009, insiders say. The decline of the local currency cannot be avoided without toughening the budget policy.

“The currency exchange rates will depend heavily upon the collaboration between the cabinet and the central bank, and on the future evolution of the international climate, as well as investors’ approach on market conditions and risk evolution”, said Lucian Anghel, senior economist of Banca Comerciala Romana, NewsIn informs.

The new executive cabinet will have to response to the bearish currency market by strengthening budget expenses, and to manage the budget deficit in an effort to reduce it, Anghel added. Otherwise, we will probably see a 4lei/euro average exchange rate.

Furthermore, Raiffeisen Bank’s senior economist, Ionut Dumitru said that if the recovery messages of the budget policy delay, the exchange rates will be hard to keep below 4 lei/euro.

“Authorities will have to cut expenses and reshape budget. If the measures in the budget policy are not prompt, the depreciation of the local currency will be more difficult to avert,” Dumitru added.

He expects a recovery of the exchange rate to 3.80 lei/euro by yearend.

Nicolaie Alexandru –Chidesciuc, senior economist of ING Bank Romania said the bank would review forecasts for currency exchange rate in 2009, taking into account an average 4 lei/euro for each quarter of this year.

“We expect 4.2 lei/euro rate in first quarter of the year, from 4.05 lei/euro in second quarter and 4.2 lei/euro in the following three months. The national currency will probably end year at 4 lei/euro”, Chidesciuc said.

Raiffeisen’s economist expects more frequent interventions of National Bank of Romania in order to make the depreciation of the leu more gradual.

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