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Romania Leu Depreciates to Lowest in a Week; Bond Yields Rise

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Sept. 12 (Bloomberg) -- Romania’s leu depreciated to the lowest level in a week on speculation a surge in inflation to the highest in a year isn’t enough to prompt the central bank to increase interest rates.

The leu weakened as much as 0.3 percent to 4.5015 per euro, the lowest level since Sept. 5, before trading down 0.1 percent at 4.4939 by 5:05 p.m. in Bucharest. Yields on the country’s 2018 euro-denominated bond due in 2018 rose five basis points, or 0.05 percentage point, to 4.795 percent.

The central bank left its benchmark rate unchanged at 5.25 percent for a third consecutive meeting on Aug. 2. The inflation rate climbed for a third month in August to the fastest in a year at 3.9 percent, a report showed yesterday. That exceeded the 3.7 percent median estimate of eight economists in a Bloomberg survey.

“We assess as highly likely that central bank remains on hold at 5.25 percent, at least for the rest of the year, as the external and internal tensions deem it necessary that it takes a cautious approach to monetary policy,” Roxana Hulea, an analyst at BRD Groupe Societe Generale SA, wrote in a note to clients today. “Further leu depreciation cannot be ruled out.”

The leu gained as much as 0.2 percent earlier today after Germany’s top constitutional court cleared the way for ratification of a permanent euro-area rescue fund.

Political wrangling between Romania’s president and prime minister led to a presidential impeachment vote last month. The European Central Bank has pledged to buy bonds of the euro-areas most indebted countries in an effort to contain the region’s debt crisis.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

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

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