The Euro reaches a new record high against the leu

The European currency yesterday reached this year's highest level, after passing the threshold of 4.36 lei last week. The Romanian National Bank (NBR) yesterday displayed a reference rate of 4.3620 lei/Euro, up 0.95 bani compared to the previous session.

The last time a higher Euro/leu was higher than this Friday was in June 2010, when it reached 4.3688 lei/Euro.

On the currency market, the Euro opened at 4.3560 lei and climbed to the maximum level of 4.3680 lei. The European currency concluded Friday's session on 4.3639 lei, up 0.17% over the previous day.

While, as reflected by the interbank market and by the exchange rate of the NBR, the Euro currency strengthened against the leu, on the international markets the Euro lost ground against the American dollar. The Euro/dollar exchange rate reached 1.3239 units on Friday, down 0.81% compared to the previous session.

Of all the currencies in the region, on Friday the Hungarian forint had the biggest depreciation (0.68%), all the way to the level of 314.35 forint/Euro. The depreciation came on the back of the announcement made by ratings firm "Moody's", which cut the rating of Hungarian bonds to "Ba1" from "Baa3" ("junk", which means it is not recommended to investors).

The Polish zloty also fell 1% on Friday, as the euro/zloty exchange rate reached 4.5426.

At the exchange rate of the NBR, the Euro was not the only currency to gain against the leu, but so did the American dollar and the Swiss Franc. On Friday, the NBR displayed an official exchange rate of 3.2926 lei/dollar, up 3.78 over the previous day. The last time the exchange rate was above this level was in January, when the Central Bank announced an exchange rate of 3.2934 lei/dollar.

The reference exchange rate for the Swiss Franc reached 3.5554 lei on Friday, up 1.29 bani over the previous session.

• Credit Default Swaps at a record high

Aside from the fluctuations experienced by the currencies of the emerging countries, CDS (Credit Default Swaps - which indicate the risk of default) reached this year's highs at the end of last week.

Romania's risk premium reached this year's high, on Friday, climbing to 490 basis points, higher than October, when it peaked at 472 basis points.

Hungary's risk premium climbed abruptly by 638 basis points, reaching this year's highest level, as "Moody's" downgraded Hungary to the category of countries which are not recommended for investments.

Poland's CDSs also made a new high for 2011, reaching 337 basis points.

• Euro, the longest decline of the past 18 months, compared to the dollar

On Friday the Euro ended the fourth consecutive week of decline, this being its longest losing streak against the dollar in the past 18 months. The drop between November 21st and November 25th was caused by the failure of Germany's bond auction, which showed that the current sovereign debt crisis of the Eurozone can reach even the safest countries.

The Euro fell 2.1% last week, reaching 1.3239 dollars on the New York market, from 1.3525 dollars on November 18th. The Euro currency has not seen such a drop of four consecutive weeks since May 2010.

On Friday, the Euro fell 0.8%. On that day, Italy sold bonds worth 8 billion Euros at a yield of 6.504% - the highest since August 1997. Italy's auction came only two days, after Germany, the greatest economy in Europe, only succeeded in placing 60% of a ten-year bonds issue.

Analysts say that the sovereign debt crisis is no longer affecting just the "outskirts" of the Eurozone, which shows that the leaders of the region have no solutions to end this situation.

According to specialists, worries are increasing over the ability of the European officials concerning the management of the sovereign debt crisis.

Friday night, Standard & Poor's cut Belgium's credit rating by a notch, from "AA+", to "AA", with a negative outlook. S&P considers that the banking guarantees, the political instability and the slowdown of Greece's expansion will make it hard to lower the country's debt. Belgium's downgrade by S&P, is the first in the last 13 years.

A.V.