XTB: Leu is on a downward path against euro

“In the Friday’s trade, leu’s bears have passed the 4.1950lei/euro resistance level, a level that it already tested recently, and capped week at 4,2001lei/euro; according to technical analysis elements, once this resistance level is passed, the leu is very likely to stick to the trendline, unless other major economic or financial news or interventions from the central bank burst in that could push the euro in the opposite direction”, said Victor Safta (photo), director of X-Trade Brokers Romania.

Year-to-date, the national currency hasn’t been closing sessions at the current level. However, the leu is not the only CEE currency that fell markedly over the past seven days.

The Hungarian forint and the Polish zloty fell sharply in the last few days, after Budapest government official made comments on the possible resemblance between the situation in Hungary and in Greece that instilled fears over the eurozone budget crisis. The forint dropped last week by 5.19% against euro, to the lowest level in a year. The Polish zloty on the other hand gave up 2.73% against its European counterpart, Czech koruna by 1.09%, and the leu by 1%, according to XTB analysis.

The depreciation of the national currency has positive effects over exporters but dramatic consequences over borrowers’ capacity to meet their euro loan payments, which couldn’t come at a worse time after the Government’s austerity measures.

“The forex market will keep its last-month trendline: euro collapsed against US dollar to 2006 levels: below 1.2USD/EUR. And should global fears on the eurozone economy persist, global fear on the economies of non-eurozone members is even greater, and the currencies there will take the brunt of it accordingly”, X-Trade Brokers analysts said.

“Let’s not indulge in illusions: at least not in case of Romania. We cannot pin the blame only on external factors for the depreciation of the leu, since there are sufficient internal risk factors: the assumption of the liability of the Government in the Parliament for the austerity package, the uncertain situation on the disbursement of the next tranche from the International Monetary Fund and the sources for covering budget deficit in a sustainable way and on a medium to long term”, said Safta.

The only currency in Europe that increased considerably in the past week against the single European currency was the Swiss franc that gained 2.24%, reflecting investors’ perception that now “it is much safer to be outside the European Union”, a fact that is supported by the ruble and Turkish lira stability.

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