Big Foreign Banks Bet On Stronger Leu Again

05.18.2011 ZF English

The Romanian leu has once again become interesting in the world's financial centers, which have returned with bets on an appreciation towards 4 lei per euro, after having forgotten about the Eastern European market for a while.

This time their optimism has to do with prospects of the central bank BNR favoring a future leu strengthening, which would help in fight against the increasingly costly inflation.

In addition, yields of Romanian treasury issues, especially short-term ones, seem attractive, amid an improvement in the general economic outlook.

BNP Paribas and JP Morgan traders privately recommend to clients to bet on the leu, expecting an exchange rate of RON4 per euro.

Analysts of Barclays Capital, the investment division of one of the biggest banks internationally, and those of Citi, see prospects of a slight leu strengthening, recommending a bet on the Romanian currency in their reports.

Ilker Domac, analyst within Citi in charge of emerging markets in the region, expects the euro to reach close to RON4 on the back of the economic growth recorded in the first quarter, coupled with the continuous improvement of external performance and a lack of obvious evaluation problems.

Romania's economy expanded by 0.6% in the first quarter, in line with the expectations of the market. This was the second consecutive quarter with economic growth, which translates into a technical exit from recession.