Feb. 12 (Bloomberg) -- The leu headed for the lowest level in a month after the Romanian central bank boosted currency supply through weekly repurchase operations and inflation accelerated more than forecast in January.
The leu, which ended its longest stretch of losses since Jan. 1 by remaining little changed yesterday, resumed its decline after the central bank lifted a limit on the size of its repo agreement auctions. Inflation quickened to 6 percent in January, beating the 5.4 percent median estimate of 15 economists surveyed by Bloomberg.
“The central bank stepped up again the repo amount and the allocation rate was the highest since November, therefore we expect more easing in interbank rates which is not supportive for the leu,” OTP Bank Romania SA analysts including Bucharest-based Mihaela Neagu wrote in a note today.
The leu weakened 0.2 percent to 4.4032 per euro by 5 p.m. in Bucharest, the lowest on a closing basis since Jan. 8, according to data compiled by Bloomberg. It lost 0.4 percent this month, the worst performance among eastern European currencies tracked by Bloomberg.
The Banca Nationala a Romaniei increased the limit to 11 billion lei ($3.3 billion) from 10 billion lei a week earlier as commercial banks’ demand for the leu reached 33 billion lei. The bank started capping the repo amount on Oct.8 to help shore up the currency and cut supply to as low as 4 billion lei.
“At 4.4 per euro, the leu offers a lot of value,” Esther Law, a senior emerging-market strategist in London, at Societe Generale SA, wrote in a note today.
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