Romanian Leu Heads for First Back-to-Back Weekly Drop This YearIrina Savu
Romania’s leu headed for its first back-to-back weekly retreat since November as mounting concern over a Cyprus bailout dented investor confidence in riskier emerging-market assets.
The currency weakened for a second day after the European Central Bank said yesterday it may cut off emergency funds to Cyprus’s lenders unless a rescue plan is in place by March 25. The leu, the second-best performer after the Russian ruble in eastern Europe so far in 2013, has pared gains since the Romanian central bank scrapped a cap on the size of its weekly repo auctions on March 4, providing unlimited funding to commercial banks.
“Central and eastern European currencies were battered by the Cyprus saga” and “there was no ray of light for the leu either, as external headwinds continued to entail a substantial knock-on effect on the region,” BRD-Groupe Societe Generale SA analysts including Bucharest-based Roxana Hulea wrote in a note today. “In absence of a quick fix solution, the leu should continue to trade above 4.4 per euro.”
The leu lost 0.1 percent to 4.4262 per euro by 5 p.m. in Bucharest, taking this week’s decline to 0.8 percent. The currency depreciated 0.9 percent in the previous five days.
Cypriot lawmakers will begin debate today on legislation to unlock bailout funds. Euro-area finance ministers expect a proposal from Cyprus “as rapidly as possible” to raise the 5.8 billion euros ($7.5 billion) needed to trigger the emergency loans, they said in a statement late yesterday after meeting in a teleconference.
Cyprus will continue talks with Russia after it didn’t get the financial support it sought from the country, Cypriot Finance Minister Michael Sarris said.
The leu rallied this year on increased foreign investor demand for Romanian debt after JPMorgan Chase & Co. and Barclays Plc announced the inclusion of local-currency bonds in their benchmark emerging-market debt indexes from March 1 and March 31, respectively.
John Taylor, founder and chief executive officer at FX Concepts in New York, said he hasn’t owned euros in his funds for 1 1/2 years, preferring assets from other European nations, including Romania.