Romanian Leu Gains Most in One Month After Cyprus Bailout Deal

Romania’s leu strengthened the most in almost a month after Cyprus avoided a disorderly default by securing a bailout from the euro area, boosting investors’ appetite for riskier emerging-market assets.

The Romanian currency appreciated for the first time in three days as finance ministers from the 17-nation region agreed on the outlines of an aid package last night, paving the way for 10 billion euros ($13 billion) in emergency loans. The leu gained 0.7 percent this year as Romania’s inclusion in major emerging-market debt indexes this month buoyed foreign investors’ demand for the nation’s bonds.

“The short-term reaction in central and eastern Europe could be better bids returning to the more solid markets such as local currency Romanian bonds which sold off recently in the wake of Cypriot bank woes,” traders at the Vienna-based Erste Group Bank AG wrote in a note today. “It still remains to be seen if the surviving banks will avoid deposit flight after opening.”

The leu appreciated 0.3 percent to 4.4145 per euro by 5:02 p.m. in Bucharest, the biggest gain on a closing basis since Feb. 27, according to data compiled by Bloomberg. It lost 0.8 percent last week as European leaders searched for a solution to Cyprus’s financial crisis.

The leu advanced this year after JPMorgan Chase & Co. and Barclays Plc announced the addition of local Romanian bonds to their benchmark debt indexes from March 1 and March 31, respectively.

The inclusion helped the Bucharest-based Finance Ministry raise a record 11.4 billion lei ($3.4 billion) of local debt in January. It issued 4.03 billion lei of fixed-income securities last month, more than the 3.7 billion lei planned, and sold the targeted 3 billion lei of bonds this month.

Before it's here, it's on the Bloomberg Terminal.