Briefing Romania

The Romanian leu continued to slightly outperform its regional peers on Friday, trading in the 4.7250-4.7300 range. The week ahead looks less eventful for the local currency which should trade between 4.7200 and 4.7400 against the euro.

Speaking of FX stability, on Friday the S&P affirmed Romania’s rating at ‘BBB-‘ with a stable outlook. Among its main assumptions for the base-line scenario, the agency envisages “real exchange rates remaining relatively firm”. This is in line with our view of a controlled depreciation of the local currency, but not exceeding the inflation differential between Romania and its main trading partners.

Romanian government bonds recoupled with their regional peers to some extent, inching 4-5 basis points higher at the longer end. The September auctions will start this Thursday, leaving a few days for market players to position.

We should see a higher interest from local players at today’s NBR deposit auction as front rates declined towards the 2.50% key rate on Friday. This will likely keep cash rates around 2.50% in the days to come.