The Euro reaches a new low

• Analysts claim the NBR affected the exchange rate

The European currency yesterday fell to a nine-month low. The Romanian National Bank displayed a reference exchange rate of 4.1843 lei/Euro, down 2.05 bani, compared to the level of 4.2048 lei/Euro, recorded Friday. The last time this level was reached was on June 2, 2010, (4.1835 lei/euro).

Analysts consider that the strengthening of the leu can be attributed to the intervention of the NBR.

Lucian Isar, economic analyst, said that there is a major player, the Romanian Central Bank, that influences the fluctuations of the exchange rate, which is not set by the free market.

He said: "The recent evolution of the currency, even though it is minor in terms of its amplitude, suggests that the Central Bank is beginning to stimulate a trading strategy called "carry trade", like it also did in 2006 and 2007. The stimulation of that strategy is done by maintaining a positive interest rate differential and a low volatility". He added that the use of this method, intended to lower inflation, proves that the central bank is acknowledging the inefficiency of the recent monetary policy experimentations, which have unhinged the inflation expectations.

Călin Rechea, economic analyst, said that the appreciation of the leu is caused by the Central Bank, but it could also be a reaction to the increase of exports recorded in the month of January. However, he thinks that this strengthening of the Romanian currency will be temporary.

Nicolaie Chidesciuc, the chief-economist of ING Bank, said that as early back as January, the estimates of ING Bank expected the exchange rate for the Euro to be at 4.15 lei.

He considers that the interest rates may also be one of the factors influencing the evolution of the exchange rate. "The increase of the interest rate are making the local currency more attractive, because buyers of lei will get a higher return on their money, thanks to the higher interest rate", said Nicolaie Chidesciuc. He added that such a strategy is attractive when the exchange rate is relatively stable and as an increasing number of players buy lei, the leu will increasingly strengthen, and if the interest rates fall, then this will obviously lead to the depreciation of the leu.

According to a macroeconomic report, the analysts of ING Bank expect an exchange rate of 4.20 lei/Euro at the end of the year.