Romanian Leu Weakens for First Time in Three Days

Romania’s leu weakened for the first time in three days, retreating after the second-biggest advance this year among emerging-market peers.

The currency has beaten all peers bar the the Brazilian real this year as Romania’s entry to JPMorgan Chase & Co. and Barclays Plc’s emerging-market bond indexes from March boosts foreign investors’ appetite for the nation’s debt. The Finance Ministry plans to sell 500 million lei ($152 million) in one-year bills on Feb. 18 and 800 million lei of five-year debt on Feb. 21, according to data compiled by Bloomberg.

“With the next leu bond auction due on Thursday, we may see foreign demand for local debt subsiding somewhat over the next couple of days, something which should favor a slight leu depreciation,” Mihai Tantaru, a Bucharest-based economist at ING Bank Romania SA,wrote in a research note today.

The leu depreciated less than 0.1 percent to 4.3846 per euro by 4:50 p.m. in Bucharest, paring its appreciation this year to 1.4 percent.

The nation’s October 2015, January 2016 and July 2017 bonds currently meet the criteria for index inclusion as they demonstrate the highest degree of liquidity, according to JPMorgan.

Romania sold $1.5 billion of 10-year dollar bonds at a yield of 4.5 percent as demand exceeded $7 billion, Diana Popescu, the head of Treasury at the Finance Ministry, said in a phone interview today.

“We consider this issuance positive for leu-denominated paper,” analysts including Ana-Maria Morarescu and Nicolae Covrig at Raiffeisen Bank Romania SA wrote in a research note today. “The ministry has a comfortable buffer and could limit the supply of debt paper, supporting a correction of recent increases in yields.”

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