What will happen with the Romanian leu in 2010 ?

The Romanian leu has appreciated sharply in recent days and is currently testing key resistance at RON4.2000/EUR. On a purely technical basis, a decisive breach of this level would set up further gains towards the stronger end of its RON4.1200-4.3500/EUR trading band.

We believe that appreciatory pressures have been building recently as a result of the looming presidential run-off election on December 6, which will lead to the formation of a new government and an end to a political crisis that has been in play since the beginning of October.

An International Monetary Fund (IMF) mission led by Jeffrey Franks visited Romania over October 28-November 6, 2009 to initiate discussions with the country's authorities on the second review of the Stand-By Arrangement (SBA). This review mission was quite recently followed by an unexpected IMF visit (14 - 17 December).

EU and World Bank staff teams have also been concomitantly assessing performance and prospects under the EUR 20 billion multilateral support package for Romania. The third tranche of support from the SBA, of about EUR 1.5 billion, is contingent upon satisfactory completion of a 3rd review, which will probably take place in January 2010.

However, despite such good progress, given the current political environment, crucial components of the policy package cannot yet be implemented. Therefore, "the next loan tranche will be released as soon as Romania overcomes the current political gridlock", and a budget for 2010 will be presented by a new government to the parliament.

The uncertain political situation in Romania and the weak results of some non-financial companies hinder the appreciation of the leu against the euro for the period to come but by the end of 2010. « Political uncertainties and weak payment balances of the companies outside the financial sector prevent the coming back of the leu on a positive trend, for the near future"

The currency will depreciate , once the discussions about reforms get accelerated.

I think that the leu will go down till 4.5 RON - 4.6 RON for one Euro in February or March next year.

The correction after this weak position wil be fast and the leu will fall back to 4.25 - 4.3 RON for 1 Euro.

For those that are sitting on a lot of Euro's wait a little bit and cash them when the leu goes down in Q1/2010.

Freddy Jacobs