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Analysis:Why the leu suffers more than the other currencies in the region

The leu suffers depreciations during this period of crisis in a larger measure than the currencies in the euro zone. According to players on the currency market, this happens because speculators withdrew and due to the imbalances in the Romanian economy.

For example, over the last two weeks, the Czech kron suffered a depreciation of 0.2% against the euro, while the Polish zlot appreciated with over 3% against the euro. Over the same period, the Forint/euro was constant. On the other hand, the depreciation of the leu against the euro went up to 2.7%.The withdrawal of speculators on the currency market ( phenomenon which turned it into the playground of the big local commercial companies) and the bad situation of macro-economic indices determined fluctuations of the exchange rate leu/euor and the depreciation of the leu against the euro over the latest period of time, consider the representatives of the currency market.

That withdrawal, although it could be felt some weeks ago, started some months ago, under the conditions of the trouble on the American financial market, Cristian Sporis explained, -manager of treasury and capital market within the Raiffeisen Bank Romania. " It was a withdrawal of the financial players some months ago, when the rumours about Bear Stearns ( the American bank which, after its losses, was taken over by their competitor JPMorgan, in April - o.n.) Cristian Sporis said.

What made the players go back ? " Romania is penalized by foreign investors because it has the poorest qualifications offered by the rating agencies, within the markets in the region" Ionut Dumitru mentioned, the head of research department in Raiffeisen Bank Romania.Dumitru explained that the perspective of foreigners on the economy could be noticed in the case of proficiency required on the single market for Eurobonds issues by Romania.

They were larger than in the case of any other country in the region. As a result of the financial players leaving the market, tradings of local economic agents, exporters and importers started to dominate the market, so that the movements of the leu could be explained through the structure of commercial deficit. " Given the fact that in Romania the level of the deficit is big, the currency buying orders are normally larger than the sellingones, which leads to the depreciation of the national currency" Cristian Sporis from Raiffeisen Bank considers.

Why some currencies in the region, such as the Polish zlot and the Czech kron depreciate less than the leu during crisis period?

The Raiffeisen treasurer considers that the answer is given by the structure of macro-economic indices. Poland has a current account deficit ( which relies on the commercial one - o.n.) of 3% of the GDP against 14% in Romania and the Czech Republic has a surplus of current account.

Regional investitors can withdraw at a certain moment from the majority of the markets in the region. But, due to the structure of the commercial deficit, in the case of Poland the pressure on the sale of zlots in exchange for euro is more reduced than on the Romanian market, while in the Czech Republic, the demand for kron is even higher than that of euros. " This is why, when the leu loses 3% against the euro, we can see that the zlot and the kron depreciate by 1.- 1.5% at most" Ionut Dumitru said.

According to the head of Raiffeisen treasury, in some months ago the volume of daily tradings on the foreign currency market was of 3-4 billion euros, now it was reduced to 400 - 500 million euros. But the leu suffers not only more powerful depreciations on a longer interval, but with more significant fluctuations during a day. « The situation is generated by the reduced depth of our market ( small volumes of trading - o.n.). The lack of depth is not due to the withdrawal of speculators but the fact that the local actors are not used to using protection instruments against the fluctuations of exchange rate", Ciprian Dascalu trader within the Millenium Bank Romania explained.

"On the other hand, the traders are not used to protect themselves against fluctuations and we do not have many hedging operations. Probably it is hard for them to understand that it costs ( bank commissions, o.n.) but any risk involves a cost" Dascalu added. As a result, most of the times the traders prefer to make exchanges among themselves. When a big importer needs euro for payments, the effect is felt immediately against the leu, which drops abruptly, he concluded.

 

Sursa: http://www.actmedia.ro

Tags: against which raiffeisen romania market currency other currencies region euro suffers