Romanian Leu Drops as Companies, Households Buy Euros for Loans

The Romanian leu weakened for a second day as companies and households took advantage of a rally in the local currency to pay euro-denominated loans.

The currency fell as much as 0.5 percent to 4.4415 per euro before paring the decline to 0.1 percent at 4.4260 per euro by 4:35 p.m. in Bucharest today. The leu has gained 2.4 percent since Romania held general elections on Dec. 9, making it the best performer among emerging-market currencies tracked by Bloomberg in the period. The currency has retreated 2.3 percent this year.

The leu strengthened to the highest level in more than seven months this week on improved investor appetite as Prime Minister Victor Ponta’s new government won a confidence vote in Parliament on Dec. 21. Ponta is counting on a two-thirds majority in the legislature to pass a 2013 budget and start talks with the International Monetary Fund and the European Union in January to renew the nation’s stability accord. About 63 percent of total private loans are in foreign currencies, central bank data show.

“The stronger leu is great news” for companies and citizens with loan repayments in euros, Ponta said while addressing ministers at the beginning of a government meeting in Bucharest today. “The perception of stability in the country after the elections has helped strengthen the leu and that perception must remain valid throughout 2013,” he said.

Yields on Romania’s 2016 euro-denominated bonds rose three basis points, or 0.03 percentage point, to 3.04 percent today, according to data compiled by Bloomberg.

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