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Isarescu: We should let exchange rate, market function

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The national currency has not depreciated in recent months and it is worse than an exaggeration to say that the (national currency) leu is on the bottom of the precipice, the governor of the National Bank of Romania (BNR), Mugur Isarescu told a Thursday's press conference, mentioning that the forint and zloty depreciated more than the leu compared to the euro.

"This fuss, which is actually exaggerated, I saw in a newspaper today, with the depreciation of the exchange rate. The leu has not depreciated in recent months. It appreciated in the summer from 4.76 to 4.72 [lei for 1 euro] and then it went to 4.75. So it is worse than an exaggeration to say "the leu is on the bottom of the precipice" and so on. As for the evolution of the leu against the dollar, we can neither target two things nor look in different directions as much as we would like. It is about an appreciation of the US dollar and a depreciation of the euro in the context of a full-fledged trade war with currency components. So it is normally a concern, but we do not have much to do with it. With the euro, we cannot influence the evolution of the euro against the dollar," said Mugur Isarescu.

He mentioned that if we witnessed a more sensitive depreciation in our area it was the Hungarian forint and the Polish zloty.

"If we take 2018 as reference point, the leu depreciated against the euro by about 3pct, and the forint by 8pct and the zloty by about 4-5pct. We cannot afford any longer to continue with this fear that any slight appreciation or depreciation of the leu means the end of the world has come. I believe we should let the exchange rate and the market function," said Isarescu.

According to the governor, the leu "paced" this summer in a margin of less than 1pct.

He said that in terms of the current account balance, there are slight signs of improvement in the sense that the trend of imports has weakened. Isarescu mentioned that there is a deterioration in services, a sector that in the past had an important contribution in the first part of the year when it offset the negative balance of the trade balance. Finally, Isarescu also said that a depreciation of the exchange rate could not even the current account balance. To adjust the current account deficit, a combination of monetary and fiscal measures, and, as far as possible, structural reforms, are needed.



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Friday, October 4, 2019