Although most specialists see a 3.65 – 3.68lei/euro band for the end of this year, opinions differ, without excluding the possibility of a 4lei/euro level, especially for beginning of 2009. Specialists polled by Wall-Street made forecasts on the currency exchange rate for this yearend and beginning of 2009, and the aftereffects of possible fallout of national currency over the local economy.
Pressure of financial crisis over the national currency
The dramatic meltdown of the national currency down to nearly 4 lei/euro, spread concerns among managers of Romanian companies, especially those with import activities, but also among Romanians who have contracted loans in euro, as the burden of their loans increased.
The response of companies and population to currency exchange bounces, it is highly sensitive. Will the exchange rate near to 4 lei/euro threshold or will it go down? National currency closed yesterday’s inter-bank market at 3.7110 – 3.7145/euro.
“Volatility of the currency exchange rate after august 2007 rose significantly. If we consider a variation band in this period, at an average depreciation trend of 3.8 lei/euro, the upper threshold is at 4 lei/euro level. As a result, reaching this level is not excluded, but we expect this to happen in case of events likely to lay short-term pressure on national currency,” said Rozalia Pal (photo) senior economist at UniCredit Bank Romania.
The small scale of the currency market in Romania compared to other emerging markets in the region will make the financial crisis the birth pains of exchange rate, the domestic currency market remaining exposed to speculations of large international players, specialists say.
As foreign cash inflows (foreign direct investments, short-term investments on equity market or monetary market, foreign debts) are slowing down or even shrinking, the curren
