Romania’s Leu Weakens to Lowest in Month on Borrowing

Sept. 28 (Bloomberg) -- The leu weakened to the lowest in more than a month as Romania’s Finance Ministry increased the size of its monthly borrowing program.

The currency depreciated 0.5 percent to 4.5389 per euro by 5 p.m. in Bucharest, the lowest intraday level since Aug. 14, bringing the quarterly loss to 2 percent. Yields on the 2018 euro-denominated bonds increased two basis points, or 0.02 percentage point, to 4.847 percent.

The ministry said it will borrow 4.15 billion lei ($1.2 billion) and 150 million euro ($194 billion) in October, compared with 3.3 billion lei in September and 2.4 billion lei in August. Romania, which has been embroiled in a power struggle between President Traian Basescu and Prime Minister Victor Ponta over the past three months, has sold less debt than planned on the domestic market in June, July and August.

“The leu is driven by politics and the state’s financing needs,” Monica Croitoru, a Bucharest-based economist at Societe Generale SA wrote in note today.

The ministry raised more local debt than planned in September for the first time since April, adding 4.54 billion lei. It also sold 750 million euros of euro-denominated bonds maturing in 2018 on Sept. 4.

Banca Nationala a Romaniei kept its interest rate unchanged at 5.25 percent at a policy meeting this week, matching all 18 economists’ estimates in a Bloomberg survey. Inflation rose to 3.9 percent in August, the highest in a year, as a drought pushed up food prices in Romania.

The political struggle led to Basescu’s impeachment vote in July, which was subsequently invalidated by the country’s Constitutional Court due to lower than required turnout. The president returned to office at the end of August.

“The volatility could increase in the next few months,” as the country plans to hold parliamentary elections on Dec. 9, Croitoru said, referring to the currency.