The Romanian Leu is Gaining Ground at the Start of the Year
The announcement of the American Investment Bank J.P. Morgan that it will include Romania in the banks Government Bond Index-Emerging Markets has boosted the national currency, which was already on an ascending path.
Ştefan Stoica, 17.01.2013, 14:23
The Romanian currency, the leu, is registering its best moments in the past year. It has appreciated to 4.33 units against the Euro, the lowest level in the past eleven and a half months and has significantly gained ground against the US dollar, which is being traded at 3.26 lei. The Romanian national currency followed a positive trend at the end of the year 2012, with analysts saying the elimination of tensions on the Romanian political scene and the formation of a government backed by a large majority were the main elements which generated this positive change.
Against this backdrop, Romania’s image abroad has improved and the investors’ confidence in the country has increased. However, the leu firmed significantly on Wednesday, shortly after the American bank J.P. Morgan announced it would include Romania in the bank’s Government Bond Index-Emerging Markets, designed to track a basket of bonds issued in local currencies by emerging market governments. Scheduled for March 1st, Romania’s entry into the J.P.Morgan’s bond index, will be a gradual process, to unfold during three months. The advisor to the Romanian central bank governor, Adrian Vasilescu, says the announcement made by the aforementioned American financial institution will enhance the leu’s prestige.
Adrian Vasilescu: ”One of the first notable effects will be to improve the image of the leu, enhancing its prestige. Secondly, we will benefit from a second monitoring and a mirror to look into how the leu is regarded at international level.”
As regards the investors’ reaction, Adrian Vasilescu shows cautious optimism:
Adrian Vasilescu : ”It remains to be seen. There are always two moments when we speak about reactions: it is the shocking moment when the announcement is being made and then comes the moment of reconsideration. We are eagerly waiting to see what the long term effect will be.”
Local analysts say the announcement made by J.P. Morgan is the best piece of news on the local financial market. They say Romania will become more visible and accessible to portfolio investors, which might generate an increase in the capital market. Analyst Dragos Cabat has said in an interview with the daily BURSA that Romanias entry into the J.P.Morgans bond index is actually an international recognition of Romania’s status of emerging country.
Dragos Cabat has also said that when making reference to merging countries so far, one actually referred to Poland, the Czech Republic and only occasionally to Hungary. The daily ZIARUL FINANCIAR also hails the announcement made by the American bank and reviews some of the most important consequences of the move: Romania will have the opportunity to get loans faster and cheaper and the Finance Ministry will allow itself to stabilize its base of investors and thus avoid speculators.
