Thursday, January 28, 2010

Leu Gains to 1-Week High as IMF Team Advises Unfreezing Loan

By Piotr Skolimowski

Jan. 27 (Bloomberg) -- The leu appreciated to its strongest in a week against the euro after an International Monetary Fund mission said it will recommend unfreezing a $30 billion bailout loan for Romania.

The leu rose as much as 0.4 percent to 4.1118 per euro, its strongest intraday level since Jan. 20. It traded little changed at 4.1259 as of 5:10 p.m. in Bucharest. The Romanian currency has advanced 2.6 percent this year.

An IMF team will recommend releasing 2.3 billion euros ($3.2 billion) of aid to Romania in February after the one- month-old government won parliamentary approval for the 2010 budget, Jeffrey Franks, head of the fund’s mission to Bucharest, told reporters today. Half of the sum will go to bolstering central bank foreign-exchange reserves, while the other half will supplement the state budget, he said.

“It looks like the IMF has given Romania a clean bill of health and this should help boost foreign inflows into the currency,” said Nigel Rendell, senior emerging-market strategist at RBC Capital Markets in London. “The leu seems to be everybody’s favorite in the region right now and there is talk about it going to 4 per euro in the coming weeks or month.”

The bailout package was frozen on Nov. 6 after political infighting toppled the government. The IMF demanded the formation of a new government and the passage of the budget before resuming payments. Prime Minister Emil Boc put together a Cabinet on Dec. 23 and lawmakers approved the spending and revenue plan on Jan. 14.

The Polish zloty weakened 0.6 percent to 4.0968 against the euro, Hungary’s forint lost 0.7 percent to 272.97 and the Czech koruna traded 0.7 percent lower at 26.212 against the common currency.

To contact the reporter on this story: Piotr Skolimowski in Warsaw atpskolimowski@bloomberg.net

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