Bloomberg News

Romanian Leu Set for Biggest Two-Day Rally Since 2010 on Support

August 07, 2012

Romania’s leu headed for its biggest two-day rally in two years after the Balkan nation’s central bank was said yesterday to buy the currency.

The leu appreciated 0.2 percent to 4.5656 per euro by 4:03 p.m. in Bucharest. A close at that level would mark a 1.4 percent back-to-back climb, the steepest two-day advance since July 2010.

The Banca Nationala a Romaniei yesterday bought euros with lei, said two traders at Bucharest-based banks, who couldn’t be named because of company policy. Inflation may accelerate beyond the bank’s forecast after political turmoil pushed the leu to the weakest on record at 4.6520 in intraday trading on Aug. 3, Governor Mugur Isarescu said yesterday.

“The central bank reiterated its continued vigilance in defending the leu,” Roderick Ngotho, a strategist for emerging markets at Royal Bank of Scotland Group Plc in London, wrote in a report to clients today. “The leu versus euro is the laggard of the risk rally that is worth pursuing in our view.”

The leu today pared gains of as much as 0.9 percent after ING Groep NV said the political tensions are unlikely to cease soon and are worsening prospects for the currency. The leu will probably weaken to 4.85 per euro by year-end and may temporarily breach 5.00 per euro, Vlad Muscalu, a Bucharest-based economist with the Dutch bank, wrote in a report to clients today.

“Political tension has escalated significantly and no end can be seen on the near-term radar, putting the country on a dangerous path,” Muscalu said. “We doubt that recent gains are more than fleeting.”

A power battle between Prime Minister Victor Ponta and his rival President Traian Basescu led to a presidential impeachment vote on July 29, whose outcome is still pending a Constitutional Court ruling.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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