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Coalition Collapse Triggers Romanian Leu Depreciation

Romanian leu lost around 1% against the euro in Thursday’s mid-trade after the ruling coalition break-up, despite central bank’s interventions to support the currency, dealers said.
Coalition Collapse Triggers Romanian Leu Depreciation
01 oct. 2009, 13:20, English

On the local interbank market, the leu edged above RON4.26 to the euro by GMT1000, significantly weaker than RON4.2150/RON4.2180 at the trading session opening.

The central bank computed an indicative of RON4.2495 to the euro on Thursday, 1.2% weaker than Wednesday’s.

Romanian social democrat ministers in the center-left coalition government resigned Thursday after President Traian Basescu endorsed the democrat liberal prime minister’s decision to sack social democrat interior minister Dan Nica.

The leu started to fall immediately after Basescu’s decision was announced, at around GMT0730.

Half an hour later, euro sale orders were introduced in the market, stopping the leu’s decline. Banking dealers believe the central bank stepped in into the forex market to prop the local currency.

However, the leu resumed its downward path shortly afterwards, on large euro buying orders.

After the social democrat leader Mircea Geoana announced the resignation of all the party’s ministers, the leu widened its losses, and touched RON4.2490/RON4.2530 by around GMT0950.