Brexit: Romanian leu less depreciated than other currencies in the region

Romania's leu exchange rates dropped less than those of other currencies in the region following the UK referendum for leaving the EU, National Bank of Romania (BNR) spokesman Dan Suciu noted on Friday.

He explained that the impact of the vote for the Brexit was milder thanks to the central bank's awareness of this risk, and to the smaller size of Romania's financial market. BNR insists on every occasion that it has the instruments to intervene on increased volatility of the national currency, he added.

"The Friday's depreciation of the leu was predictable, because the event occurring after the vote in the British referendum is an event of significant risk. This risk had been defined by the National Bank in its Financial Stability Report in April and in its annual report released a couple of days ago. Thus, without saying it has been anticipated, it has been taken into account. But we saw the volatilities on our market, which although existing did not exceed the calculated parameters in a worrisome way. Indeed, we saw the noon exchange rate — 4.5366 lei/euro — that indicates a smaller depreciation than in the case of other regional currencies that underwent the same process," Suciu explained.

Besides the leu's position, not on the front line of volatilities, the BNR also has its monetary policy interest rate, its foreign currency reserves, and the possibility to intervene adequately in the market, and the market is aware of these facts, Suciu insisted.

According to him, the BNR expects the volatility to continue in the near future, but within manageable limits. "Obviously, we have a horizon of uncertainties in the forthcoming period. At least from an institutional point of view, a negotiation process will follow, which cannot calm down the markets," he said.

As regards the higher quotation of gold, the spokesman asserted it was expected, as bullion and the U.S. dollar are haven investments in uncertain times in Europe.

The central bank, however, will have to analyse and weigh very carefully its monetary policy decision expected next week, said Suciu.  

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