Romania’s leu weakened on bets the central bank may limit the currency’s gain after an International Monetary Fund mission extended a review of the country’s backstop loan accord yesterday.
The leu depreciated 0.2 percent to 4.3843 per euro by 5:05 p.m. in Bucharest, after advancing 0.4 percent yesterday, the biggest jump in almost two weeks. Yields on euro-denominated bonds due 2019 rose seven basis points, or 0.07 percentage point, at 3.93 percent.
The mission extended the review of Romania’s precautionary loan pact by three months. JPMorgan Chase & Co. and Barclays Plc said the nation’s bonds are eligible for entry in their benchmark emerging-market debt indexes, increasing demand for the country’s fixed-income securities and currency. The leu has strengthened 1.5 percent in January, the largest advance among emerging-market currencies tracked by Bloomberg.
“As the central bank might try to keep local market volatility at low levels, it would also presumably curb any significant advance of the leu,” Mihai Tantaru, a Bucharest-based analyst at ING Bank Romania SA, wrote in a note today.
The IMF extended the review of Romania’s 5 billion-euro ($6.8 billion) accord until the end of June after Prime Minister Victor Ponta asked for more time to complete asset sales, Mission Chief Erik de Vrijer said in Bucharest yesterday. The IMF board will meet in June to review Romania’s implementation of pledges it made under the accord, a backstop for the country in the event of a worsening of the European sovereign debt crisis.
“With no local news flow, the leu might trade on low volumes today, with the natural net demand for hard currency possibly fueling a slight softening to 4.39 per euro,” Tantaru said.