According to data released at noon on Wednesday by the central bank, one euro was quoted in BNR on Wednesday at 4.94 lei, while the US dollar stood at 4.97 lei and the Swiss franc strengthened from 5.2 lei to 5.16 in 24 hours lei

The parities came hours after Putin announced a partial mobilization in Russia, the first since World War II.

What could be the evolution of the euro in the coming months from 2022

According to the textbooks, the lei should depreciate as long as we have huge twin deficits, high national debt and we are also on the brink of war. Banks with which HotNews spoke recently say that the euro to 5 lei is a very likely scenario by the end of this year.

The future trajectory of the exchange rate will depend on: i) geopolitical factors (extent/duration of the war and related international sanctions), ii) the state of international trade, iii) dynamics/financing of the twin deficits, iv) the government’s ability to implement reforms and launch investment projects foreseen in the Recovery Plan and sustainability; v) implementation of the monetary policy of the main and regional central banks, BRD representatives said.

The NDB will remain vigilant on changes in the exchange rate, addressing the risk of excessive volatility caused by speculative activities, thereby enhancing the role of the exchange rate as a pillar of confidence/stability in the current volatile and uncertain environment.

Why Iserescu does not let the lion get too weak

The current regime of the lei exchange rate is a regime of controlled floating, which allows the National Bank to intervene in the foreign exchange market in order to “correct” excessive fluctuations of the national currency. NBR interventions are a taboo topic, no official representative of the Central Bank talks about the scale or frequency of these interventions.

Who does a strong lion help? First of all, on importers, who are easier to pay for imports. And just as it would be unusual for lower import prices to be reflected in the shelf price, there is every reason to believe that importers and retailers will hold down prices and increase your margins. In a form that is understandable to everyone, the state budget wins, because taxes and duties paid by merchants who make a profit go there.

On the contrary, a devalued lei would make imports more expensive and would immediately be transferred to prices (in the sense of their increase), which would terribly confuse Iserescu in the fight against inflation. Moreover, while a weak lei would help exporters, it would be a spurious increase in competitiveness, not a real one, through innovation or expansion into new markets.

And another reason why the BNR prefers a stable exchange rate and does not allow the leu to suddenly depreciate is related to trust in the Central Bank. After a number of economists chided the NBR for behaving like a short-sighted man by talking about transitory inflation (which was not transitory), the exchange rate loss represents the surrender of the last anchor of confidence. In any case, when it comes to a central bank, trust is the last thing you want to lose.