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Romania Leu Gains to One-Month High as Key Rate Kept Unchanged

The leu rose to the strongest in a month after Romania’s central bank kept its policy rate unchanged at the second-highest level in the European Union and said it was limiting funding for lenders to support the currency.

The currency appreciated less than 0.1 percent to 4.5304 per euro by 5:12 p.m. in Bucharest, the highest on a closing basis since Oct. 2. Today’s advance extended this week’s gain to 0.6 percent, the second-best among central and eastern European currencies tracked by Bloomberg.

The Banca Nationala a Romaniei left its main interest rate unchanged at a record low of 5.25 percent for the fifth consecutive month today, matching the estimates of all 21 economists surveyed by Bloomberg. Governor Mugur Isarescu said today he is limiting funding at weekly repo and intervening in the foreign-exchange market to prop up the currency.

“The central bank felt forced to tighten the monetary policy reins,” after the leu weakened 0.8 percent in the first week of October, Thu Lan Nguyen, a Frankfurt-based foreign- exchange strategist at Commerzbank AG, said in an e-mailed note today.

Price increases quickened to an annual 5.3 percent in September, the highest in more than a year. The recent pickup in inflation is “transitory,” Isarescu said in Warsaw on Oct. 18.

Policy makers tightened a cap on lending to commercial banks to 4 billion lei ($1.1 billion) on Oct. 29, compared with 6 billion lei on Oct. 8 to support the leu, which fell to a two- month low on Oct. 5.

Lower Rates

Central banks in the region, including the Czech Republic and Hungary, are cutting rates or considering lowering borrowing costs to boost their economies. Hungary cut its main interest rate on Oct. 30 for a third month to 6.25 percent and may consider further easing on concern a recession is taking hold, while the Czech central bank cut its main rate to close to zero yesterday.

The Bucharest-based statistics institute will release flash estimates for the country’s third-quarter gross domestic product on Nov. 15, according to data compiled by Bloomberg.

Yields on 2018 euro-denominated bonds rose four basis points, or 0.04 percentage point, to 4.63 percent.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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