BUCHAREST (Romania), May 6 (SeeNews) - The Romanian currency depreciated significantly against the euro on Tuesday, for the first time crossing the th
BUCHAREST (Romania), May 6 (SeeNews) – The Romanian currency depreciated significantly against the euro on Tuesday, for the first time crossing the threshold of 5 lei per euro, central bank data showed.
The euro-to-leu exchange rate stood at 5.0378 on Tuesday, 1.21% higher than a day earlier, the National Bank of Romania (BNR) said.
The previous all-time high euro-to-leu exchange rate, of 4.9783, was recorded on May 19, 2023, according to BNR data.
According to an instant comment issued by Austrian banking group Erste [BSE:EBS] on Tuesday, the Romanian leu depreciated to 5.095 against the euro around Tuesday noon from 4.975 in the morning. The depreciation was driven by political turmoil after the first round of presidential elections, as turnover on the local foreign exchange market increased significantly on Monday and Tuesday, with daily traded volumes twice as high as weekly volumes during normal trading times, Erste noted.
George Simion, head of the far-right populist nationalist opposition party Alliance for Uniting Romanians, took a significant lead in the first round of Romania’s presidential election on Sunday, winning 40.96% of the votes. In the May 18 run-off he will face pro-EU, pro-NATO independent candidate Nicusor Dan, the mayor of Bucharest, who gathered 20.99% support in the first round. On Monday, prime minister Marcel Ciolacu resigned and said his centre-left Social Democrat Party (PSD), the largest party in parliament, is exiting the governing coalition after the coalition’s presidential candidate Crin Antonescu failed to make it to the election runoff.
“We think that 5.10 is the new line in the sand for the NBR [National Bank of Romania],” Erste said. “Strong FX pass-through to inflation and the important role played by the EUR/RON for consumer confidence should limit further abrupt depreciation of the RON in the short-term. Weak fundamentals related to high twin deficits speak in favour of further RON weaking in small steps over the next years.”
The Austrian banking group also noted that, under the BNR’s managed floating FX regime, the local currency has been unusually stable since 2022, with average nominal depreciation below 1% per year, whereas before 2022, the norm was an annual depreciation of around 2% for the Romanian leu, close to the inflation differential between Romania and the Eurozone.
“Multiple shocks, from strained supply chains after the pandemic to the war in Ukraine did not allow a stronger depreciation of the leu under the NBR’s managed floating FX regime. The cost of RON stability was eroded competitiveness for local exporters,” Erste stated.
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