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Romanian Leu Retreats as Concerns Over New Government Rise

Romania’s currency retreated as investor concerns rose over the formation of a new government since negotiations between President Traian Basescu and Premier Victor Ponta’s coalition have yet to start.

The leu weakened more than 0.2 percent to 4.5438 per euro by 5 p.m. in Bucharest, the lowest on a closing-basis since Nov. 16, erasing yesterday’s gains. Yields on the government’s euro-denominated bonds due November 2019 declined two basis points, or 0.02 percentage points to 4.635 percent, according to data compiled by Bloomberg.

“The political situation in Romania remains tense and markets are likely to follow developments very carefully,” Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt, said in an e-mailed note today. “As political uncertainty will remain high until the government has been formed, we currently consider the upside in euro/leu to be the more attractive one. The 4.55 resistance area is already within reach.”

Ponta, whose Social Liberal Union got 58.6 percent of the votes in a Dec. 9 general election and seeks to secure a constitutional majority in Parliament, is hoping to convince his arch rival Basescu to name him as prime minister again. The President has the right to designate the head of a new government after consulting the winners of parliamentary elections, according to the Romanian Constitution.

Romania has been engulfed in a power struggle between Ponta and Basescu during the summer, which culminated with a 52-day suspension for the president, followed by an invalidated nationwide impeachment vote on July 29.

Basescu said before returning to his office at the end of August that he won’t nominate Ponta as Premier again and declined to repeat the statement since.

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