ING Bank: NBR is losing patience

Foreign currency sales conducted by foreign speculators are now beginning to test the patience of the NBR (National Bank of Romania) after quotes on the Bucharest forex market were pushed to a five-year low. In just a few hours of trading, the euro lost over 1% to the RON, after it had fallen 1.7% on Friday, temporarily dropping below 3.1 RON. At the official exchange rate level, the single currency lost 2.28 bani (a subdivision of the RON) falling to 3.1112 RON, a value last registered in May 2002. In spite of the RON’s rapid-paced appreciation, the NBR has not intervened directly on the forex market. Nonetheless, ING Bank analysts believe it is “just a matter of time” until the central bank makes its presence felt by buying foreign currency, taking into consideration that the RON has increased by 4.7% against the euro in the last month alone. Calculated at the beginning of the year, the appreciation of the domestic currency (in nominal terms) is close to 7.3%. “The NBR appears to be running out of patience, with the central bank potentially preferring to make a small adjustment to the RON/euro currency, in line with economic principles,” believes Florin Citu (photo), chief economist at ING Bank. The alternative scenario, in which the NBR would allow the market to correct the heavy appreciation of the RON, would entail high volatility, with serious implications for both financial stability and inflation.