Latest news with #leu
Reuters
19-05-2025
- Business
- Reuters
Romania election win for Dan reduces political risk ahead, says JPMorgan
LONDON, May 19 (Reuters) - JPMorgan said on Monday that an election win by Romania's centrist Bucharest mayor Nicusor Dan is reducing political risk ahead and that a sovereign ratings downgrade to below investment grade was now less of a concern. The Wall Street bank adjusted its forecasts following Sunday's runoff election, saying it now expected a "moderate devaluation" for the country's currency. It predicts the leu at 5.10 versus the euro by the end of the second quarter and at 5.25 by year-end, according to a note. JPMorgan also moved its exposure on Romania's international bonds to "marketweight" from "underweight" and to "overweight" from "marketweight" on local government bonds. "The process to form a majority remains tricky," Nicolaie Alexandru-Chidesciuc at JPMorgan said. "In a best-case scenario, a government might be in place by mid-June and a fiscal package might be, in a best-case scenario, approved by end-June." Dan won the country's presidential election in a shock upset over a hard-right, nationalist rival who had pledged to put Romania on a path inspired by U.S. President Donald Trump's politics.
Bloomberg
13-05-2025
- Business
- Bloomberg
Romanian Inflation Stays Flat as Political Risks Cloud Outlook
Romanian inflation remained unchanged last month as the gravest political crisis since the collapse of communism pushed the leu to a record low which will likely intensify price pressure and complicate the central bank's wait-and-see approach to monetary policy in the coming month. Consumer prices rose at an annual rate of 4.85% in April, compared with 4.86% in March, the statistics office in Bucharest said on Tuesday. That's slightly below the 4.9% median estimate in a Bloomberg survey of economists. Prices were little changed from the previous month.
Reuters
07-05-2025
- Business
- Reuters
Romanian hard-right presidential frontrunner rules out tax hikes
BUCHAREST, May 7 (Reuters) - Romania's hard-right presidential frontrunner George Simion "categorically" ruled out tax hikes if he wins election, but offered no alternative to cutting the European Union's largest budget deficit and avoiding a ratings downgrade. The eurosceptic Simion decisively swept the ballot on Sunday, with some 41% of votes, triggering the resignation of leftist Prime Minister Marcel Ciolacu and the collapse of the pro-Western coalition government. "Any tax hike means recession," Simion told private television station Digi24 on Tuesday. "That is not the solution. I will advocate lower taxation for the minimum wage." He said he had a five-year plan to cut 500,000 administrative jobs in the public sector, excluding doctors, teachers and soldiers. Simion was speaking after the political instability sparked a market sell-off, driving down the leu currency more than 2% on Tuesday, beyond the key level of five to the euro for the first time, while debt yields surged and shares tumbled. The government will stay on in an interim capacity, unable to issue decrees or take steps to curb the deficit, until the new president nominates a prime minister to form a new ruling majority in a highly fragmented parliament where the far right holds more than a third of seats. Romania is rated on the lowest investment grade by all three main agencies with a negative outlook. "We are more concerned about the leu, as the Bucharest bourse is, honestly, not yet at a level of an institution which matters a lot," Simion added, saying the former prime minister had fuelled the deficit. "I've been accused of being to blame for the leu depreciation, stocks falling, let's be serious, who was in charge?" Simion vowed to work closely with the new prime minister. He reiterated claims that, if elected, he would nominate as prime minister banned presidential contender Calin Georgescu, the far-right pro-Russian frontrunner in Romania's previous presidential election, banned in December on suspicion of Russian meddling, denied by Moscow. Simion took over after Georgescu was banned from standing, his Sunday win fuelled by anger at the ballot cancellation. On Tuesday he said he did not rule out snap elections if a parliamentary majority did not approve a cabinet led by Georgescu. "I believe I will nominate Mr. Georgescu and we will find 50% plus one lawmakers to vote for him." Georgescu has repeatedly said he favoured nationalisations and preferential treatment for Romanian companies. Simion will face Bucharest Mayor Nicusor Dan, an independent centrist, in a May 18 run-off. On Tuesday, Dan tried to reassure markets. "There is no reason for financial panic on Romania," Dan said. "Together we must project a message of calm and stability."
Reuters
06-05-2025
- Business
- Reuters
Romania looks to counter capital outflows after far-right election gains
Summary Companies Romania's international bonds continue to slide Leu currency falls past 5 per euro level for first time Trading volumes surge after presidential election Romania grappling with EU's highest budget deficit Cenbank may need to raise rates if budget outlook worsens -analyst BUCHAREST/LONDON, May 6 (Reuters) - Romania's central bank said on Tuesday it was looking for the "optimal way" to counter significant capital outflows amid steep falls in the leu currency after a hard-right opposition leader won the first round of a repeat presidential election. The bank, which holds its next policy meeting on May 16, held its benchmark interest rate at the European Union's joint-highest 6.5% level last month, faced with heightened risks over trade tariffs and fiscal uncertainty ahead of the vote. Romania's 10-year local currency bond yields jumped by some 50 basis points to 8% on Monday after eurosceptic nationalist George Simion decisively swept Sunday's ballot, triggering the resignation of Prime Minister Marcel Ciolacu. By mid-afternoon in Europe on Tuesday, most of Romania's international sovereign bonds had arrested earlier declines, but the dollar-denominated issues maturing in 2044 and 2048 remained close to their lowest since November 2022, with bid levels at 81.62 cents and 69.62 cents on the dollar, respectively. Romania, whose debt pile at 54.8% of output is still well below an 81% EU average, failed to sell domestic bonds at a regular tender on Monday due to low demand. Debt managers plan to tap domestic markets again on Thursday. "An important change happened in the currency market lately, capital inflows fell but outflows rose significantly," Romanian central bank spokesperson Dan Suciu told Reuters. "As a result, to counter these movements liquidity must be drawn from the market and (market) interest rates must rise. The central bank will look for an optimal way for this situation." Romania's leu fell more than 2% on Tuesday, past the key 5 per euro level for the first time, underperforming central European currencies. The central bank declined to comment on whether it had intervened to help the currency. The bank had previously said it would give the tightly-controlled leu "more flexibility" if political tensions eased later this year after spending what JP Morgan estimates is over 10 billion euros ($11.35 billion) on interventions in 2024. Romanian media reported a surge in interventions on Monday, which Reuters could not independently verify. "They have limited amount to spend. And clearly, if this story from yesterday continues, they would run out of reserves quite fast," said Anton Hauser, senior fund manager with Erste Asset Management. Stronger demand for euros from households to shield their savings could put further pressure on the exchange rate, which he said was "clearly overvalued." VOLUMES SURGE On Tuesday JP Morgan recommended going long on the euro versus the leu in FX spot markets, with Romania's intervention policy seemingly shifting. The central bank's foreign exchange reserves stood at 62.4 billion euros at the end of April. As the leu crashed out of the tight range it had held onto for much of the past three years, trading volumes surged to their highest levels in at least a decade in the first two sessions following Sunday's election, LSEG data showed. More than half of Romania's debt stock is denominated in foreign currency, the highest rate in central Europe, with billions more in hard currency issuance planned for 2025. While Romania's credit rating sits on the lowest rung of investment grade, investors say markets were starting to price in a downgrade, and several of its international bonds were trading below the 70 cent level, the point at which debt is typically considered distressed. Romania, whose 354 billion euro economy is central Europe's second largest behind Poland, already has an interim president until the May 18 run-off. An interim government cannot issue decrees or introduce policies. The country has the EU's largest budget deficit and risks a ratings downgrade to below investment level unless it enforces a decisive fiscal correction. A Simion victory in the run-off could isolate Romania, erode private investment and destabilise NATO's eastern flank, where Bucharest plays a key role in providing logistical support to Ukraine as it fights a three-year-old Russian invasion, political observers say. "Given the recent results and political developments, we have lifted our guidance for the 2025 budget execution from 7.7% of GDP to 8.7% of GDP, and skew the risks to the upside," economists at Wood&Company said in a note. "We see an emerging risk that the Central Bank will not be able to ease monetary policy this year and may even reverse into an emergency interest rate increase if the budget outlook worsens further." ($1 = 0.8814 euros)
