The Euro sovereign debt crisis weakens the leu

• Lucian Anghel, BCR: "This is a temporary appreciation of the European currency"

On Friday, the Euro continued to gain against the leu, rising to 4.1337 lei/Euro, reaching a five-month high, as investors are becoming increasingly risk averse, amid market rumors that Portugal and Spain might need financing. The official exchange rate of the NBR rose 1.41 bani over the previous day. The only times the exchange rate for the RON against the Euro rose above this level were July 1st, (4.3537 lei/Euro), and June 30, when the leu reached a record level of 4.3688 lei/euro.

The governor of the NBR, Mugur Isărescu, stressed on Thursday that the leu is solid enough to withstand even the statements of the head of the International Monetary Fund, who said that Romania could default due to its high level of debt. However, dealers say that the leu weakened due to shrinking risk appetite from investors, in line with the other currencies in the region.

The head economist of the Romanian Commercial Bank, (BCR), Lucian Anghel, considers that the gain of the Euro against the leu is similar to what happened in June, when the exchange rate went above 4.3 for a while. "Once the international markets calm down, the exchange rate will return to the 4.1 - 4.3 lei/Euro band", he said.

Foreign investors are currently concerned with the instability of the Eurozone, in particular with the crisis of Ireland, which now has a huge budgetary deficit due to the funds spent by the Government on rescuing its banks. Another cause for concern is the situation of Portugal and Spain, which may request to borrow money from the international financial institutions in order to be bailed out.

There are also fears that the troubles might spill over to Italy and France.

But unlike Ireland, Portugal does not have troubles in the banking system, but rather it is faced with unsustainable economic growth.

The rumors that Spain, the fifth largest economy in the European Union, could need a bailout package spooked investors, and if the country does end up needing a rescue package, the European fund created for this purpose may not be big enough.

On the other hand, the gold, considered as one of the safest investments in times of high risk aversion, has increased considerably over the past few days, passing the 143 lei/gram level.

The quotations of the Romanian currency have been on an upward trend since Friday, thus the exchange rate climbed to 4.3080 lei/euro, in line with the evolution of the other currencies in the region.

At the opening of the trading session, the Euro was quoted at 4.3000 - 4.3040 lei, above Thursday"s levels of 4.2990 - 4.3010 lei. Within a few hours, the leu had slid to 4.3050 - 4.3070 lei/euro, with a high of 4.32 lei.

Dealers say that local interest for the leu is low, which led to an increase in volatility.

• Sibex: "The NBR has the situation on the currency market well in hand"

In spite of the frequent speculative pressures in the banking system, the NBR has successfully handled the situation and has kept the exchange rate relatively steady, by cutting interest rates, which has deterred speculators, considers Ioan Aleman, head of the development department at Sibex (ed. note: the derivatives exchange of Sibiu).

He says that volatility was essentially felt only in the second quarter, without any major effect on the derivatives market, where investors were confident in the stability of the Romanian national currency and saw no reason to panic.

Thus, the price of December Euro-futures contract fluctuated between a minimum of 4.0905 lei and a peak of 4.48 lei, 8 bani above the spot market, also seen at the end of June.