Wednesday, October 14, 2009

Leu Slides to Lowest Since March as Romania’s Government Falls

By Piotr Skolimowski

Oct. 13 (Bloomberg) -- The Romanian leu slid to an almost seven-month low against the euro after the country’s minority government lost a no-confidence vote, threatening economic reforms attached to an international bailout.

The leu lost 0.3 percent to 4.2935 against the euro as of 6:05 p.m. in Bucharest. It was the weakest level since March 25.

The two opposition parties that called the vote and the Social Democrats, a former junior member of Prime Minister Emil Boc’s administration, got 254 votes in the 471-seat chamber today. The government was backed by 176 lawmakers. Boc’s Liberal Democratic Party will stay in office with limited powers until President Traian Basescu appoints a new administration or early elections are held.

“The political uncertainty is clearly negative for the leu, as the interim cabinet will rule with limited power and may fail to adopt important legislation to fulfill requirements by the IMF,” Elisabeth Andreew, chief foreign currency strategist at Nordea Markets in Copenhagen, wrote in a note to clients.

Boc has committed to push through wage and pension changes to fulfill conditions agreed with the International Monetary Fund, which is leading a 20-billion euro ($29.5 billion) loan agreement with the country.

Romania risks credit-rating downgrades as its political commitment to the terms of the bailout comes into question, Fitch Ratings and Standard & Poor’s said on Oct. 2.

In other trading, the Czech koruna declined 0.5 percent to 25.934 per euro while the Hungarian forint fell 0.5 percent to 269.23. The Polish zloty weakened 0.3 percent to 4.2338 against the common currency.

To contact the reporter on this story: Piotr Skolimowski in Warsaw

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