The depreciation of the Romanian leu against the European currency continues. The Euro increased on Wednesday, breaking a new record, and is approaching 5.1 lei.
The National Bank of Romania quotes the Euro at 5.0991 lei, the highest level ever recorded. On Tuesday, it was quoted at 5.0378 lei.
Therefore, the Euro is 1.22% above Tuesday's value.
Moreover, the leu has significantly depreciated against the US dollar, the British pound, and the Swiss franc.
The US dollar is quoted at 4.4898 lei on Wednesday, compared to 4.4517 lei on Tuesday.
The Swiss franc is quoted by the NBR at 5.4466 lei, compared to 5.3932 lei on Tuesday.
Similarly, the British pound has risen to 5.9866 lei. On Tuesday, it was quoted at 5.9272 lei.
After the Euro crossed the 5 lei threshold on Tuesday, the highest level in history, analysts at Banca Comercială Română believe that the central bank will defend a new exchange rate threshold.
"We believe that 5.1 is the new line in the sand for the NBR. The fact that the exchange rate has a high pass-through rate in inflation and plays an important role in consumer confidence should limit the abrupt depreciation of the leu in the short term. The weak fundamental position related to the twin deficits favors a continued depreciation of the leu in small steps over the next few years," said Eugen Sinca, BCR economist, cited by Profit.ro.
JPMorgan, the largest investment bank in the United States, bets against the leu following the results of the first round of presidential elections in Romania.
According to a note addressed to investors, the bank argues that market reactions after the victory of AUR leader, George Simion – known for his Eurosceptic and nationalist positions – have significantly increased the risk of a leu devaluation.
JPMorgan outlines two possible scenarios: a moderate devaluation of the leu between 3 and 5% (meaning the Euro reaches 5.2 lei) and a severe one between 15 and 20% (meaning the Euro reaches 6 lei).