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Exchange rate between 4 and 4.7 lei/euro: How much is the leu?

Is the leu over evaluated? Or is it under evaluated? Should the exchange rate be 4.7 lei/euro or 4 lei/euro? Economists debate the question of the real exchange rate almost daily, but BNR governor Mugur Isarescu is not satisfied with the quality of these debates. In his opinion both positive and negative reports should be quoted.

Mugur Isarescu placed the estimates of ING Bank economists under the question mark, as they estimate that the central bank sold 1 billion euro in May to prevent the depreciation of the national currency. Isarescu pointed out that analysts who make such calculations should wonder if there is so much liquidity in the market.

ING estimates that the central bank sold, in the second part of May between 700 million and one billion euro to prevent the depreciation of the national currency beyond the level of 4.14 lei/euro. 'Currency reserves grew by 600 million euro, to 32.7 billion euro, but in fact BNR may have sold euro to establish the exchange rate at about 4.13 lei/euro', ING specialists consider. The BNR governor referred to the comments made by business people who quote only reports which say the leu is over evaluated but forget those which say the leu should be stronger.

'If you quote some, I hope you also quote the others. If you quote The Economist Intelligence Unit which says the leu is over evaluated and it should be 4.7 leu/euro, then also quote Barclays Capital, which said that the fair value of the leu is around 4 lei/euro. I think it would be fairer to present both points of view,' Isarescu explained.

Businessmen announce an imminent economic collapse. They say exports, the engine of the economy – entered recession and a strong leu has negative effects on Romanian companies.

'A study by the Economist Intelligence Unit showed, at the beginning of the year, that the leu is over evaluated by 13%. The appreciation of the national currency continued an over evaluation of 16%. A normal exchange rate should be 4.7-4.8 lei/euro,' said Florin Pogonaru, the chairman of the Association of Romanian Businessmen (AOAR). He considers that BNR is showing 'excessive prudence'. 'You have the duty to bring the exchange rate to the level to which the economy is functioning, not to be too prudent. Being prudent means closing down everything. We think the strengthening of the national currency is acceptable in a country which is in deep crisis, a country part of a single market, without possibilities of acting through barriers of any kind,' the AOAR chairman said.

Sursa: http://www.actmedia.eu

Tags: euro which exchange evaluated quote should bnr ing euro

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