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Wednesday, September 5, 2007

Leu on the Run Down

Romania's leu fell for a seventh straight day today - to its lowest level in four months against the euro. The leu fell 0.4 percent this morning to trade at 3.3245 per euro - at 12:25 p.m. in Bucharest - its lowest since May 1. The currency gained 8.5 percent against the euro between January and June, and since that time it has been the second worst performer among the 26 emerging market currencies which are tracked by Bloomberg, losing 6.25 percentover the period.

Today's decline is attributed to a number of factors, such as the fall in the benchmark NTX Index of 30 large companies in Central and Eastern Europe - which declined 0.2 percent today - or comments from Japanese bank regulator Yoshimi Watanabe about Asian exposure to US sub prime mortgage issues, but the fact of the matter is that Romania's economy is seen as being increasingly vulnerable given the global decline in risk appetite and the developing credit crunch.

Here is a two year euro-leu cross chart, where the turnround from the end of June is quite apparent:

and here's the chart for the last month where the steady deterioration in the situation is again most clear:

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