US dollar growth prompts Romanian banks to revise exchange rate forecasts

Romanian banks have revised their yearend forecasts on the exchange rate of the domestic currency against the two benchmark foreign currencies – the US dollar and the euro, given the last week’s evolutions on the international markets, where the US currency has visibly made up for the ground it had lost to the euro.

Whereas the euro was worth about 1.13 dollars on the foreign markets last week, the single European currency yesterday plunged to 1.0804 US dollars.

At first sight, the dollar’s consolidation was fuelled by the recession of the main European economies (Germany and France), but also by optimistic forecasts regarding the American economy’s recovery.

Consequently, where will the euro/dollar exchange rate be at the end of the year or perhaps in six months? There is no exact answer to this question. Most analysts forecast the EUR/USD exchange rate will reach 1.05-1.06, perhaps even 1.08 by yearend, with the euro set to strengthen again next year, up to 1.12-1.13 dollars.

“If someone knew where the EUR/USD exchange rate is heading, they would be billionaires in any given currency. They would be the main players on the world’s markets. I personally think the euro will son consolidate to somewhere above 1.06 dollars, with a correction expected for yearend and the first months of next year. It will then rebound to 1.12-1.13 dollars. Why do I have reasons to believe the euro will bounce back? Because, although we are getting optimistic signals from the American economy, they still need to be confirmed. Also, their trade deficit is towering over other states’ deficits. Many countries prefer to weaken their currency in order to boost exports,” says Bogdan Vatamanu, treasurer at UniCredit Romania.

According to the new forecasts of Bucharest treasurers, the euro is poised to decrease slightly, within an interval ranging between 38,500 – 39,400 ROL. The same treasurers see the dollar going up in the months to come, with fluctuations between 35,200 and 36,300 ROL. One month ago, for instance, forecasts pointed to a maximum ROL/USD exchange rate revolving around 35,800. oana.nuta@zf.ro