Scenario: NBR could give currency room to fall at year-end

The National Bank of Romania could leave room for further devaluation of the national currency at the end of 2009 or early 2010 in an effort to ease money market conditions, ING said in a report.

ING analysts said a restrictive tax policy in early 2010 would leave room for further key rate cuts. The local currency is likely to stay firm against the euro on a short term over yesterday’ monetary policy rate cut by half percentage point to 8% as the measure has already been factored in.

“Moreover, as the central bank is probably present in the currency market, the exchange rates should continue falling”, report shows.

The leu could still be much overvalued and would be vulnerable to depreciation pressures, should the economic and political situation drag on into the following months, EIU said in their last country report, forecasting an exchange rate of 4.1lei/euro at end-2009.

“The leu may be significantly overvalued, based on exchange rate forecasts. The currency will remain vulnerable to depreciation pressures if the economic and political situation deteriorates dramatically in the following months”, the Economist Intelligence Unit report shows.


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