Romania’s leu rebounded from a record low after suspended President Traian Basescu survived an attempt by the ruling coalition to oust him.
The eastern European country’s currency, which fell to an intraday record low of 4.6509 per euro on July 24, gained as much as 1 percent today and traded at 4.5572 per euro at 1:05 p.m. in Bucharest. The leu has dropped 2.6 percent against the euro this month, the world’s second-worst performer after the Sudanese pound, according to data compiled by Bloomberg.
Basescu, who has been fighting his political rival Prime Minister Victor Ponta over policy, survived a second attempt to oust him in five years as a voter boycott invalidated an impeachment referendum setting the stage or further political turmoil as the International Monetary Fund starts a planned quarterly review of precautionary accord.
“The market may view positively such a reversal of a brutal political battle,” Vlad Muscalu, an economist at ING Bank Romania SA, wrote in a note to clients today. “While the leu may gain some ground, it will probably be short-lived as political tension is likely to pick up once again. There is likely increasing pressure on the coalition to recover the possibly lost ground after the apparently failed attempt to impeach the president.”
Muscalu also said the Romanian central bank, which has a managed floating policy for the leu, “may find the current calmer market conditions more favorable for intervening,” to prop up the currency.
Romania is scheduled to hold parliamentary elections in November or December. The invalidation of the referendum needs to be endorsed by the Constitutional Court.
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