BNR eyes both dollar and euro

The National Bank of Romania (NBR) governor, in an interview granted to Mediafax news agency, considers that improving and maintaining the competitiveness of Romanian commodities abroad is not only a question of the exchange rate, but also involves a productivity increase. He warns that the subsidy margin derived from the exchange rate will gradually narrow, only to be cancelled eventually.

NBR this year will assess the domestic currency evolution considering the dynamics posted by two foreign currencies, the dollar and the euro.

“Against a currency basket where the dollar and the euro hold about 50% each, we are trying to find a “balanced” exchange rate for the domestic currency, not according to daily quotations, but to a larger basis, such as monthly or quarterly evolutions,” NBR governor said.

“The currency basket is not a panacea, but a reference point. The low transparency of this currency basket is mainly due to insufficient advertising,” the central bank governor considers.

He hopes the euro will not plunge to last year’s record low, which “compelled us to depreciate the domestic currency against the dollar more than we had initially forecast, in order to bolster up the trade of Romanian commodities in the eurozone.”

“The costs of ROL’s additional depreciation against the dollar last year caused a higher-than-expected inflation increase, and if it happens again this year, we might not reach our goal of cutting the inflation rate.”

NBR governor claims that exporters do not understand that a faster depreciation of the ROL against the euro, as they advocate, would actually mean a double depreciation, also against the dollar, as the euro has itself depreciated against the US currency.

A dollar-euro basket would consider the evolutions of both currencies. Following last year’s euro-dollar evolutions, the Romanian economy was disfavoured, as the trend went against the Romanian exporters’ expectations.

On the other hand, the 46% import increase posted in January against the same month of the previous year calls for cautious action. “The issue restoring our confidence is NBR’s having noticed that the market was as oversupplied with dollars in February and March as it was last year.

NBR purchased a net amount of more than 250 million dollars, which is a record, indeed. It means that, though imports are too large, they are autonomously financed through credit lines and medium- and long-term incentives for direct investments. Moreover, imports do not exert additional pressure over the exchange market.” Mediafax