Romanian Leu Trades Near 8-Month High on Foreign, Local Demand

The Romanian leu hovered around an eight-month high as foreign investors’ demand for Romanian assets balances local demand for euros.

The currency weakened less than 0.1 percent to 4.4085 per euro by 5:05 p.m. in Bucharest, after strengthening to its highest level since May 4 on Jan. 7, according to data compiled by Bloomberg. Yields on Romania’s June 2016 euro-denominated bonds declined one basis point, or 0.01 percentage point, to 3.07 percent.

“Some flows probably pertaining to foreign players failed to strengthen the leu significantly but added to its firming bias,” Mihai Tantaru, a Bucharest-based economist at ING Bank Romania SA, wrote in a note today. “However, we see limited potential for a potential breach of 4.40 per euro psychological threshold today, something that could happen tomorrow, as we expect to see high interest from foreign players into the three- year local bond auction.”

Romania seeks to raise 4.6 billion lei ($1.4 billion) of domestic debt this month, after borrowing 8.06 billion lei in December, the most since February after political tension eased. It sold more debt than planned on Jan. 7, raising 1.09 billion lei in one-year bills and 1.06 billion lei in two-year bonds as yields declined.

Romanian companies and citizens are buying the single currency to benefit from the leu’s appreciation as they seek to secure funding for their foreign currency needs, including loan repayments in euros. About 63 percent of private loans are in foreign currencies, according to central bank data.

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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