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Romanian Leu Falls to 2-Week Low on Higher Liquidity With Banks

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March 12 (Bloomberg) -- Romania’s leu weakened to the lowest level in two weeks after the central bank extended a policy of unrestricted currency supply at a repurchase auction yesterday.

The leu pared its advance this year after the Banca Nationala a Romaniei scrapped a cap on the size of its repo auction last week and continued with its policy of lending to commercial banks without limits yesterday. It lent 2.3 billion lei to eight commercial banks, less than the 7.3 billion at last week’s auction.

The “leu declined, echoing generous liquidity conditions, as the central bank relinquished the cap on the repo again,” analysts at BRD-Groupe Societe Generale SA, including Bucharest-based Roxana Hulea, wrote in a note today.

The leu weakened more than 0.1 percent to 4.3751 per euro by 4:50 p.m. in Bucharest, the lowest level on a closing basis since Feb. 26. It lost 0.4 percent yesterday, cutting its gain this year to 1.7 percent.

The increased liquidity pushed Romania’s interbank offered rate, or ROBOR, to the lowest level in three weeks at 5.03 percent, below the central bank’s key interest rate of 5.25 percent.

Romania’s inflation rate declined to 5.7 percent in February, matching the median estimate of 12 economists surveyed by Bloomberg, as a stronger currency capped prices for food and services.

To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Irina Savu in Bucharest at isavu@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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