Foreign currency purchases by non-residents knock RON onto the ropes

The RON lost 1.6% against the euro in a single session yesterday, on a highly volatile market. Non-resident investors bought foreign currency in several stages, so that quotes had gone up by six bani (1 RON a 100 bani) by the end of the day, exceeding 3.55 RON/EUR. Even the major American investment funds placed orders to sell, as they closed their positions on the emerging markets. Dealers are talking about “panic on the market.” The official exchange rate went up by 5.78 bani to 3.5418 RON, the highest level since early February. Spectacular moves also occurred on the other markets in the region, with the Polish zloty, the Magyar forint and the Czech crown witnessing losses. The Turkish lira sustained the heaviest losses, given that speculators continued to close their positions on the emerging markets, a move that started last Friday. “People looked at 3.5 RON/EUR as a place of most resistance, yet it did not hold. As long as the panic doesn”t go away, no threshold is strong enough. I, however, believe that if the country report brings neutral or slightly positive news and the other currencies stabilise, the 3.55 RON/EUR will hold and a slight appreciation of the domestic currency could ensue. We could see a 3.52 RON/EUR exchange rate by the end of the week,” says Liviu Olaru, senior dealer with ABN Amro Bank. He says yesterday”s appreciation was caused by the purchases by non-residents, which were made in several waves. ZF