At noon on Thursday, BNR published an average dollar quote of 5.01 lei, thus surpassing the psychological threshold of 5 lei per US dollar. Compared to the euro, the lei remained stable at 4.94 lei per euro, but the depreciation of the euro against the US currency also affected the exchange rate of the US dollar to the lei.
As Romania’s economic picture does not look optimistic at all, there are only a few months left before we see the euro break the 5 lei threshold. If the BNR did not practice the regime of controlled swimming, the euro would exceed 5 lei. Currently, the BNR defends the rate as one of the last bastions of trust in the central bank.
All major commercial banks have confirmed to HotNews that year-end estimates are based on an exchange rate of 5 lei to the euro.
Why Iserescu does not let the lion depreciate
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 depreciate is related to trust in the Central Bank. After a number of economists chided the NBR for being short-sighted by talking about transitory inflation (which was not transitory), it veered off course and abandoned its last anchor of confidence. In any case, when it comes to a central bank, trust is the last thing you want to lose.
Source: Hot News RO
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