Thursday, September 10, 2009

Less volatile Romanian leu good for economy-cbank

BUCHAREST, Sept 9 (Reuters) - The limited volatility of Romania's leu currency is good for the economy because it helps exporters, central bank Governor Mugur Isarescu said on Wednesday.

Romania's leu has been the most stable floating currency in the eastern European Union since March, moving in a tight range around 4.2 per euro.

"It is a good thing for the economy, it helps exports," Isarescu told an economic seminar.
Isarescu said one of the factors that led to that was the central bank's intervention to stem the pace of its appreciation in 2007 when the economy was booming and also sold euros in "the winter months of this year", when Romania entered recession.

"I am almost certain that our pro-active approach discouraged exchange rate volatility," he said.
He declined to comment on market talk about more recent interventions and he also said that less liquid Romanian markets limited volatility.

"We do not encourage more volatility, but we do not discourage it either, markets are free," he said.

However, he warned that policymakers across the globe were talking with less enthusiasm than before about free floating and lack of market interventions.

Isarescu said the bank will continue to keep an eye on liquidity and he was ready to fight any increased appetite for weakening the leu through money market operations.
"We're trying to do a fine-tuning," Isarescu said.

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