The leu weakened for a second day as Romania’s central bank scrapped a limit on the size of its weekly repo auctions almost five months after imposing the cap, increasing currency supply to commercial banks.
The leu pared the second-best advance this year among eastern European, Middle Eastern and African peers tracked by Bloomberg after Banca Nationala a Romaniei lent the 7.3 billion lei ($2 billion) demanded today, compared with bids for 29.8 billion lei last week. The central bank, which has a managed- float policy for the currency, has restricted its repurchase agreement operations since Oct. 8.
“Withdrawing the limit for one-week repo operation represents another step of the relaxation of the money market liquidity conditions,” Florentina Cozmanca, a Bucharest-based economist at Royal Bank of Scotland Group Plc, wrote in a note. This follows an “increase” in the capped “amount in January from 4 billion lei,” Cozmanca said.
The leu depreciated less than 0.1 percent to 4.3650 per euro by 2:34 p.m. in Bucharest, cutting its gain this year to 1.9 percent, according to data compiled by Bloomberg. The currency had slid to its lowest level in two months on Oct. 5.
Romania plans to raise 3 billion lei through debt sales this month, below the 3.7 billion lei target and 4 billion lei of securities sold last month.
The country last issued 398 million lei in July 2016 bonds on Feb. 14 at an average yield of 5.73 percent. That compared with a rate of 6.03 percent at a similar-maturity sale on Jan. 10.
“We may see some softening pressure for the leu today, possibly to 4.37 per euro, with losses for the local currency limited by the recent positive momentum of domestic debt,” Mihai Tantaru, a Bucharest-based economist at ING Bank Romania SA, wrote in a note today.
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