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XTB: National currency could face short-term difficulties

The national currency could face short-term technical difficulties in surpassing the 4.0375 leu/euro exchange rate, but this level could be exceeded in two or three weeks, if no major upset occurred, say the X-Trade Brokers experts.

'It depends on the international background, if the events in Japan or the conflicts in the Middle East or a possible reinforced monetary policy in the US led to a greater reluctance to risk, which would negatively affect the Romanian leu, pushing it once again towards the 4.2-4.25 leu/euro rate,' said X-Trade Brokers managing director Victor Safta.

The Romanian currency gained 2.8 percent over the euro in March, thus adding up to a 4.55 percent appreciation since the New Year. It soared 9.5 percent compared to the American dollar in 2011, the explanation of this higher figure lying with the European currency appreciation in front of the dollar.

The euro was preferred by investors who have been expecting the decision made by the European Central Bank to increase the interest reference rate, to make the investments in this currency more attractive compared to those made in dollars.

'The national currency appreciation trend became visible in the second half of February but it took small steps back then. There were allegations of a discreet interference from Romania's National Bank, refuted by its officials. The upward trend accelerated last week, though. The stabilization of the Japan situation simmered things down and increased the urge for high-risk investments. The national currency took full advantage of this attitude and the new agreement signed with the IMF helped in this respect,' Safta added.

The central bank fights better against inflation with a stronger leu and the price of major products in the national currency ought to decrease in a few weeks.

On the other hand, a number of Romanian services and products display prices in euros, so that the stronger leu decreases their price with no delay.

The local consumers are rewarded by this strengthening, as well as those who have to pay instalments for credits in euros. This evolution hits the exporters, whose revenues, expressed in the national currency, are getting lower, reads the weekly report of XTB.

The export deliveries have been a major balancing factor for the past couple of years, cushioning a fall that might have been more severe otherwise. January brought a trade deficit by 60 percent smaller than the one in the same month in 2010, the growing rate of exports being one and a half as big as imports (47.8 percent compared to 29.4 percent).

Although it proves helpful in reaching its inflation target, the central bank cannot disregard the evolution on the market, and the risk of a speculative excess to push the leu/euro rate below the 4,00 lei threshold cannot be overlooked.

'The central bank could decide to rein in the national currency escalation, which might be perilous for a couple of reasons. Firstly, it could create a too optimistic view on economy, which does not observe reality, and would boost a growth based on consumption not covered by the domestic production, which is a long-term non-sustainable model. Secondly, the background would be created for an aggressive negative correction of the national currency, which would draw the attention even more than the previous appreciation and would affect trust in a negative manner. The central bank could interfere, however, when the exchange rates are much lower than they are now. For the moment, the national bank could leave the market stabilize itself, at rate levels exceeding 4 to 4.05 leu/euro rates,' Victor Safta added.

X-Trade Brokers DM is a brokerage house created in Poland in 2002. The company has subsidiaries in 19 countries in Europe, Asia and Central America, being authorized and monitored by the local regulatory institutions for each country's financial market. The subsidiaries have distinct legal identities and observe each country's legislation.

XTB was officially launched on the Romanian market in February 2009 and is authorized by the National Securities Commission.The traded amounts in Romania reach an average billion euros.

Sursa: http://www.actmedia.eu

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