The leu-dollar exchange rate reaches all-time high, passing 5 lei on Thursday.
The US dollar reached an all-time high against the Romanian leu, passing 5 lei on Thursday and outperforming the euro, which was officially 4.94 lei. The exchange rate published by the National Bank of Romania is an indicator of many factors, from the international political context to the level of trust in international markets. It must be noted, however, that the central bank in Bucharest calculates the dollar-leu exchange rate based on the dollar's international exchange rates against the euro, which, like other currencies, has also been depreciating against the US dollar, with investors fearing that the European Union's economy may suffer from the consequences of the war in Ukraine. The turbulence on the hard currency market has further increased after the Russian president Vladimir Putin ordered a partial call-up of reservists, which paves the way for a major escalation of the conflict. The war has entered its seventh month, and Russia is losing ground on the battlefield.
Traditionally, in times of big economic crisis the US dollar is the preferred currency of investors, who have more faith in the resilience of the United States' economy. Moreover, the Federal Reserve, the central bank of the United States, has been raising the interest rate at a more intense pace than the Central European Bank in its fight against the inflation rate, which has reached alarmingly high levels. The dollar's passing the 5-lei exchange rate brings an unhoped for gain for people who keep their savings in dollars and for companies exporting to the US and other countries that use the dollar in transactions.
On the other hand, the higher leu-dollar exchange rate makes Romania's imports in dollars more expensive, deepening the trade deficit and the current account deficit and causing imported inflation. Companies with loans in dollars are also affected by the appreciation of this currency. In Romania, the effects will be felt especially in respect of imports of raw materials, including oil, and will probably also be reflected at some point in the price of fuel at filling stations, despite some slight price reductions seen recently, especially for petrol, as a result of lower oil prices on international markets.
There will also be more pressure on the price of imports from a series of countries from outside the European Union, especially the United States, including in the area of cars and electrical equipment. Finally, travels and holidays to certain countries, including some of the Romanians' preferred destinations, like Egypt and Turkey, will most likely become more expensive. With respect to the macroeconomic indicators, the dollar's appreciation will be reflected in a rise in the cost of the state's loans in dollars and the share of the foreign debt in the Gross Domestic Product. (CM)
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