The leu is losing ground against the Euro and the Swiss Frank

The leu/euro yesterday reached the lowest level in the last four months, with the NBR displaying an exchange rate of 4.291 lei/Euro, up 2.03 bani over the previous session. Analysts claim that the strengthening of the Euro, which had fallen below 4.1 lei in April, against the leu is caused by the situation in Greece.

Analyst Ionel Blănculescu said that the strengthening of the European currency is 90% caused by the situation in Greece, and the remaining 10% is caused by the interventions of the NBR.

He said that the difficulties on the Washington-Athens axis are causing a crisis on the capital markets, which closed in the red over the last trading sessions. This fall was also reflected in the exchange rate, which followed the same direction, he said.

Ionel Blănculescu said: "We are seeing the beginning of a severe sovereign debt crisis, with far worse consequences than those of the 2008 crisis".

He claims that for the first time in the history of the world, this crisis could lead to a blow similar to that dealt by "Lehman Brothers", this time in the European Union. Ionel Blănculescu also said that, demand for Euros is currently dropping, because capital is exiting the country, due to Greece"s contagion effect.

As for the interventions of the NBR in the market, the analyst said that the former has a duty towards exporters, which were hurt by the Euro going to 4.08 lei, reached a few months ago.

"The NBR is trying to do so something to rehabilitate itself with exporters", he said.

This favors exporters, who say they are happy with the current exchange rate.

"The weakening of the leu benefits exporters", said Mihai Ionescu, the president of

the Romanian National Association of Exporters and Importers (ANEIR). He added that a sustainable exchange rate ranges between 4.1-4.3 lei/Euro.

If the leu falls strengthens enough to go below 4.1 lei / Euro, then exporters incur losses, and if it strengthens above 4.3, then the exchange rate can become dangerous, leading to exaggerated prices, he said.

Economic analyst Călin Rechea considers that the interventions of the Central Bank on the exchange rate are not efficient.

"I don"t to know what extent the NBR can play with the Euro leu exchange rate", he said. He went on to say that the efficiency of the interventions of the NBR needs to be studied, as they only last for a certain time and their effects disappear in time.

On Friday, the leu also weakened against the Swiss Frank (CHF). The NBR announced a reference exchange rate of 3.5099 lei/frank, up 0.49 bani over the previous session. The Swiss Frank reached a new high on Friday for the second day in a row.

Călin Rechea considers that the Swiss Frank will continue to strengthen. In his opinion, the Swiss Central Bank can"t intervene further to weaken the Swiss Frank. Moreover, the current strengthening of the Swiss frank can be tracked to the massive inflows of capital into the Swiss banks, according to the economic analyst.

Călin Rechea said that people keep their savings in Swiss Franks, because they are considered a safe haven currency, considering what is happening in Greece.

Even though the leu lost ground to the Euro and the Swiss Frank, it strengthened against the US Dollar, up to 2.9734 lei. The exchange rate displayed by the NBR on Friday was 0.86 bani lower than that of the previous session (2.9820 lei/dollar).

• Drăgoi: We may sell government bonds denominated in dollars on the international markets

The Ministry of Public Finance has considered the conversion of Government bonds into dollars, due to the interest shown by American investment funds, in the recent Eurobonds issue on the foreign markets, says Bogdan Drăgoi, secretary of state in the Ministry of Public Finance.

"There are many American funds which are very interested in emerging markets. (...) America has many advantages, their investors have an appetite for longer maturities, and the amounts are a lot higher", Bogdan Drăgoi said at the end of last week.

He added that the decision on an eventual issue of government bonds denominated in Dollars will only be made based on the context at the time.

Călin Rechea, economic analyst, considers that the current fall of the dollar would have helped in the case of a launch of an MTN program (ed. note: medium term notes) in that currency. "An issue in dollar would have been better than one denominated in Euros, since the dollar is weakening", he said.

The first MTN issue ended on June 10, and the total value of the subscriptions amounted to three billion Euros.

The final price was set at the mid-swap rate, with a margin of 255 basis points, up over the price obtained last year, which had been set at the mid-swap rate, plus a margin of 268 basis points, he said.

Romania raised 1.5 billion Euros, from the sale of bonds on the foreign markets, at a yield of 5.29%.

As for the fee of the arrangers (ed. note: "Societe Generale" and "Erste Bank"), Bogdan Drăgoi said that it has been set at half of the market rates. The fee was "heavily" negotiated, but the official of the Ministry of Finance did not provide an exact figure, because the arrangers requested a confidentiality clause.

"The launch of the MTNs on the foreign markets was a success", Gheorghe Ialomiţianu the Minister of Public Finance said yesterday.

He added: "Romania has no problems in financing its budget deficit. We have gone from short term loans to medium term loans".

On the other hand, Călin Rechea considers that a true success would be if the state did not need to borrow money anymore, given that Romania is unable to finance the budget deficit.

He added that there are signs that the economy is reentering recession, as it is possible that the industry, which has been pushing the economic growth so far, has run out of steam.