No need to worry about the "heavy" dollar just yet

Much to the surprise of the financial market, the National Bank of Romania (NBR) in October implied that it supported a higher increase of the ROL/USD exchange rate as compared to the previous months. The NBR position, expressed by several bank officials, left no doubt about plans for a dollar increase, although indirectly stated. The market reacted and the companies, banks and the population bought foreign currency, based on the NBR statements.
In the first days after the central bank’s intentions were propagated on the market, the dollar did earn a couple of hundred ROL, while the NBR was happy with the market reaction.
However, one month later, the ROL has lost only 0.2% to the dollar, extremely little as compared to market expectations. Furthermore, the central bank was a net currency seller in November, as total sales exceeded purchases by 61.4 million dollars. If the NBR wanted to push the exchange rate, it should have bought more dollars, instead of selling, dealers say.
The NBR position on what happened in November was expressed yesterday by Teodor Buftea, head of the monetary policy division: “The central bank’s interventions on the forex market were aimed at preserving the market balance, considering the higher seasonal demand and the big fluctuations of the euro/dollar rates on the international markets. The exchange rate evolutions are part of the central bank’s policy, which was announced before and which targets a 3-4% ROL appreciation in real terms (December/December) against a basket comprised of euros (60%) and dollars (40%), reflecting the structure of Romanian foreign trade.”
Dealers also have something to say. “It’s obvious that, although the central bank was after a higher depreciation of the ROL against the dollar, it did not want it to be too sudden or too big. However, they failed to take into account the banking customers’ rush to buy currency, prompted by the indirect statements through which NBR officials implied an increase of the ROL/USD exchange rate was to follow. Hence, the foreign currency deficit faced by the customers,” Cristian Sporis, a senior dealer with Raiffeisen Bank Romania told Ziarul Financiar.
Sporis quoted a day in mid November, when a very high currency deficit was faced by the customers (currency purchases from the customers were much smaller than the banks’ currency sales to the clients), the ROL/USD rate could have climbed by 350-380 ROL/USD, had the NBR not intervened and sold several million dollars.
The forex market posted this year’s highest deficit in November – more than 170 million dollars.