Saturday, October 11, 2008

Romania cbank says intervened to test market

BUCHAREST, Oct 10 (Reuters) - The Romanian central bank intervened to prop up the leu on Friday, directly selling 40 million euros ($55 million) in a move it said was primarily aimed at testing the market.

'The Romanian National Bank made, around noon, a direct intervention on the currency market by selling around 40 million euros,' central bank spokesman Mugur Stet said in a statement.

'The intervention was aimed primarily at verifying the functioning of the market in the current context of volatility and uncertainty.' [ID:nLA360525].

The leu was trading at 3.7700 per euro, up 1.9 percent from Thursday's close of 3.8425, by 1140 GMT.

Emerging European currencies have been pummelled since Sept. 12, when U.S. bank Lehman Brothers (nyse: LEH - news - people )' bankruptcy protection filing triggered a wave of risk aversion and cash hoarding by western banks that have hammered emerging markets' assets.

Analysts say the leu is particularly vulnerable because of the European Union member's vast current account deficit and high foreign currency borrowing which means its economy could destabilise if foreign funds were to dry up.

The leu has lost 5.9 percent against the euro in the last month, compared with 9.9 percent for the Hungarian forint, 6.6 percent for the Polish zloty, and 3.3 percent for the Czech crown.

The central bank computed the official reference level for the leu at 3.7690. Overnight rates were at 14.57/16.01 percent.

The Romanian central bank has not intervened officially since September 2005 when it moved to weaken the leu. The bank has declined to comment on rumours of intervention since.

Traders cited covert central bank intervention earlier on Friday and also earlier this week when the leu had fallen to 3.986 per euro, its lowest point in almost four years.

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