March 10, 2009 will remain a critical moment for the modern evolution of the local banking system, with the last minute news flurry now underway in Romania: press reports, releases and official communiqués informing that Romania is on the brink of concluding an agreement for a rescue package with European Union and International Monetary Fund.

Currency exchange rate: 5 lei/euro

[Update]:"It's likely to have a similar path as the forint"

The warnings from Romanian authorities over the past month mean that Bucharest’ call for help did not come as a surprise.

Although such an agreement would cap the euro’s rally versus leu on a short run, the situation in Hungary where the forint slumped 16.5% since it concluded the deal in mid October indicates that the local currency could drop even more against the single European currency.

"It's likely to have a similar path as the forint," said JP Morgan analyst Miroslav Plojhar. “It's likely that when the central bank is not defending a specific level, the leu should weaken", Plojhar added, Reuters informs.

Ivailo Vesselinov, EMEA economist at Dresdner Kleinwort said if market players deemed the amount of the agreement was too low, they could punish the leu and the prices of Credit Default Swaps (CDS – insurance against loan default).

The leu is overpriced and the rescue package would not improve the market condition, reads a report of UK-based research institute, Capital Economics, the first institution to say that Romania was likely to call for help from IMF.

“The national currency has surprisingly remained proof to the latest troubling events, suggesting that National Bank of Romania may have intervened to stabilize the fluctuations of the currency exchange rate”, said the analysts at Capital Economics.

However, all these interventions could be banned in case of a deal with IM