Foreign markets jittery again, NBR sells foreign currency to hold RON steady

The rekindling of the financial crisis in the West yesterday put pressure on the RON/euro exchange rate and on Romania’s default risk premium, but the hardest-hit country in the region is Hungary, whose CDS leapt to 378 basis points (3.78 per cent). In the euro zone, Belgium risks bankruptcy, with CDS of these countries hitting record levels, which in Spain’s case are significantly higher than Romania’s. After Ireland’s significant bailout package of 85 billion euros did not manage to temper the nervousness of financial markets, a bleak picture is painted in the international media, about the prospects of countries such as Spain and Italy being too big to be rescued from bankruptcy. For the time being, Romania has not yet been visibly contaminated, but international credit default swaps have again exceeded 300 basis points, reaching 325 points, which indicates that financing in euros may become more expensive if pressure continues. Yesterday the National Bank intervened on the forex market to temper the trend of depreciation of the RON, with the euro staying at 4.30 RON. The forint depreciated by 3.5% against the euro in the past week, with the central bank deciding Monday to increase the key interest rate by 0.25 percent.