Danske Bank forecasts RON 4.45/€1 exchange

"Events on the political stage and perspectives regarding the result of negotiations with the International Monetary Fund continue to put pressure on the leu. We, Danske Bank, estimate an exchange rate of RON 4.60/€1 for the coming 12 months and of 4.45 units/€1 in the coming three months," Head of Emerging Markets within the Danish bank, Lars Christensen, told Business Standard.

The Danske Bank report warns about rising concerns of foreign investors about negotiations carried out with the International Monetary Fund (IMF) by Ukraine, Romania, and Latvia. "In all these countries, relations with the IMF are under pressure from the political stage, and there are fears that the Fund could withdraw its support to one or several states in this group. For the moment, it is very likely that the IMF will postpone the payment of the next tranches for Romania and Ukraine, due to political uncertainties," the Danske Bank report indicates.

Regarding the regional context, the Danish analysts said that some investors are concerned about the political situation in the region, considering that elections are to take place in many Central and Eastern European states in 2009 and 2010.

"It seems to me that the exchange rate estimated by the Danske Bank analysts is too high. I think that a more accurate estimate for the coming three months would be RON 4.35/€1. Anyway, I do not believe that the RON 4.4/€1 level will be exceeded, especially since we are seeing international level recovery. It is true that the current economic downturn will be longer than the financial crisis, but the trend is of improvement," Narcis Noaghea, dealer of Banca Comerciala Romana (BCR), said.

Nicolae Chidesciuc, Senior Economist at ING Bank, indicated that the current political crisis is worsening, and the leu continues to be under pressure due to this. "Negotiations with the Fund could become complicated, but now, as elections are nearing, the exchange rate will not fluctuate significantly.

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