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Leu Drops Most in 7 Weeks as Romania Cuts Inflation Forecast

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Aug. 7 (Bloomberg) -- The leu declined the most in seven weeks as Romania’s central bank lowered its inflation forecast for the second time this year, fueling speculation the central bank will keep cutting interest rates.

Romania’s currency depreciated for a second day, losing 0.9 percent to 4.4446 per euro at 5:03 p.m. in Bucharest. That’s biggest drop since June 19 on a closing basis.

The Banca Nationala a Romaniei forecasts year-end inflation at 3.1 percent compared with a prediction of 3.2 percent in May, Governor Mugur Isarescu said today in Bucharest. Policy makers lowered their main interest rate by 50 basis points to a record 4.50 percent on Aug. 5, more than economists forecast.

The leu declined “as the market starts to price in more rate cuts on the back of lower forecasted inflation,” Abbas Ameli-Renani, an emerging-market strategist at Royal Bank of Scotland Group Plc in London, said by e-mail. While further easing in rates is likely to weaken the currency in the short term, “I expect the bulk of this has already happened,” he said.

To contact the reporter on this story: Valeriya Ivashchenko in London at vivashchenk1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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