The political situation has a negative effect on the exchange rate

Political risk has always led to higher volatility and depreciation of the leu, especially when they have led to situations such as votes of no-confidence, or actions for suspending the president, bank analysts say.

Amid political instability, there were several attempts to speculate on the exchange rate of the leu, this very year, one analyst said.

Most experts agree that the leu will depreciate to 4.3 lei against the Euro, at the end of this year. In their opinion, the leu should weaken even further, because Romania"s economy is still in a precarious state.

On the other hand, a stronger leu would be harmful to exporters.

ING Bank analysts stressed that the NBR has kept the exchange rate under control ever since the beginning of the crisis (September 2008), and claim that according to their calculations, the NBR spent 11 billion Euros on its interventions in the currency market. "This calculation would suggest that the NBR may continue to protect the exchange rate", ING analysts said, who added that things could become a lot more complicated a few years from now, unless the overall state of things improves domestically and globally, then the leu could continue to depreciate, together with a decrease in the size of the currency reserves (in 2012 Romania will need to start paying back loans to the IMF and the European Commission).

The positive sentiment in the region is induced by the appreciation of the Euro against the American dollar, amid expectations of the market players that the Fed might continue purchasing assets.