BNR’s Vasilescu: The leu declined fast, after 1 January, but not as fast as to create concerns
Jan 18, 2019
BNR’s Vasilescu: The leu declined fast, after 1 January, but not as fast as to create concerns.
The decline of the national currency in relation to the euro is 0.6 percent, and only in the situation in which it declines over 4-5 percent the Central Bank analysis rigor intervenes, National Bank of Romania (BNR) strategy consultant Adrian Vasilescu maintains.
"It is clear that the national currency has moved downwards fast after 1 January, but not as fast as to create concerns among those who make a rigorous analysis of the market. Books say that when a currency, regardless on which market, declines over 4 percent or 5 percent there comes a situation that must be analysed in view of some interventions of the Central Bank. In our case, the devaluation is 0.6 percent, which doesn’t fall under any intervention rigor of the Central Bank. I am saying this because in the public space there often comes the question: ’What is BNR doing? Why doesn’t the BNR intervene?’. In the first place, the National Bank, as no other central bank nonetheless, will not be able to and will never do any intervention against the natural exchange rate of the currency. This natural exchange rate is determined by causes that aren’t on the currency market, but on the extra-currency market. The devaluation reasons are outside the currency market," Adrian Vasilescu explained on Digi24 private television broadcaster.
The BNR official explained that the moment the local currency market goes up or down excessively "we look around, because we are in a region."
"The moment the local currency market goes up or down excessively we look around, because we are in a region, where, these days, after 1 January, the forint had a devaluation moment in the middle of this months, after which it regularised its rate and entered a normal trend, the Czech crown fares well, and the Polish zloty is stabilised. (...) There are a few causes that are also related to our particularities. One, the Ordinance [Ordinance 114 on some fiscal-budget measures] doesn’t come first, because many say so. There is also the Ordinance, but first comes the balance of payments, the trade balance which then reflects into the balance of payments. The fact that Romania imported last year as compared to exports goods worth over 1 billion euro each month created a special situation on the currency market. Therefore, the currency market firstly looks at what happens with the trade balance. How much a country imports, how much it exports and what is the difference between imports and exports. Only if exports are good, imports go faster than exports. Then the leu -foreign currency exchange rate is the first mechanism that intervenes to re-balance things in economy. We import so much because we have a high consumption demand that cannot be covered by the domestic offer of goods and services. To cover this demand we resort to imports. Importers are stimulated to bring goods from abroad," the BNR strategy consultant mentioned.
The National Bank of Romania (BNR) on Friday posted a 4.6975 lei for one euro exchange rate, increasing 0.85 bani (+0.18 percent) from the rate announced on Thursday.
Moreover, the leu also dropped in relation to the US dollar, which reached 4.1192 lei, increasing 0.66 bani (0.16 percent) from the rate on Thursday, namely 4.1126 lei per dollar.
On the other hand, the national currency went up in the exchange rate for a Swiss franc, 0.12 bani (-0.03 percent). Thus, the franc exchange rate reached 4.1441 lei, compared to 4.1553 lei per franc one day before.
The gram of gold went down by 0.92 lei, to 170.2283 lei, from 171.1534 lei, in the previous session. AGERPRES (RO - author: Daniel Badea, editor: Mariana Nica; EN - author: Adina Panaitescu, editor: Rodica State)
[Read the article in Agerpres]