Foreigners” money boosted the volume of transactions on the interbank forex market to a record 14.3 billion euros in March, an increase of more than 6 billion euros compared with the monthly average of last year.
The increase in interests over the last few months has rekindled foreign investors” interest for speculative placements in RON, even though the overall emerging market region is seeing its allure fluctuate. Starting in December when interests on the monetary market began rising from less than 1% minimums in October and November, the foreign exchange transactions amounted to over 10 billion euros every month, cumulating almost 50 billion euros in four months.
The extent of the capital moves ordered by financial investors was revealed a few days ago, when volumes plunged to about 200 million euros, as Western markets were closed due to the Catholic Easter holidays.
Immediately afterwards, the volume of daily transactions reverted to 700-800 million euros.
“The increase in the volume over the last few months is tightly connected to the financial investors” presence. If we think that their presence was not that significant a year ago and look at how much the volume has grown lately, we may say that approximately 40-50% of the daily transactions are financial and not commercial,” comments Radu Craciun, chief analyst with ABN Amro Romania.
There are somewhat more “pessimistic” estimates floating around the market about the amount of the speculative capitals on the forex market.
“Only 20% of these funds are commercial money, the rest is speculative money. The last few days provide a pretty accurate picture in this regard,” a dealer says.
What is for certain is that a year ago it only took a 10 million-euro order for the market to react right away, with either an appreciation or depreciation of RON, while such amounts are now easy to swallow, with exchange rate movement occurring at orders of 15 million euros or more. The Romanian corporate clients” orders usually vary from 1 to 5 million euros, while foreign investors enter and exit with 5 to 10 million at one time.
Dealers, however, say that the total volumes are distorted, as in case of non-resident players banks prefer to conduct transactions, which go both ways, that is a simultaneous purchase and sale of foreign currency, paid on different dates and exchange rates, so that one client is registered twice.
Radu Craciun says that there is one more thing that points to how important the weight of financial investors is, namely that unlike 2005 when the RON would appreciate regardless of what happened on the regional forex markets, “we are now seeing a tighter connection.”
Last year, the market was dominated by expectations for a fast-paced continuation of the RON appreciation, and foreign currency inflows only served to pressure towards such a thing. The foreign capital pressure has not been visible over the last few months, with the exchange rate witnessing a series of minor fluctuations and rebounds. razvan.voican@zf.ro