Wednesday, September 12, 2012

Romania’s Leu Falls as Concern Over ECB Plan Outweighs Inflation

The leu weakened as concern the European Central Bank’s bond-buying plan may be derailed outweighed a rise in Romania’s inflation rate.

The leu depreciated 0.4 percent to 4.4898 per euro by 6 p.m. in Bucharest, erasing yesterday’s gains, according to data compiled by Bloomberg. Yields on the country’s 2018 euro- denominated bonds rose four basis points, or 0.04 percentage point, to 4.748 percent.

Investors’ concern over the success of the ECB’s program increased after Mariano Rajoy, Spain’s prime minister, said late yesterday he won’t allow the European Union or the ECB to stipulate how the nation narrows its budget deficit as a condition for buying the country’s bonds. Romania’s inflation rate climbed for a third month in August to the fastest in a year at 3.9 percent, exceeding the 3.7 percent median estimate of eight economists in a Bloomberg survey.

The inflation data “had no immediate impact on the leu, but might eventually prove favorable, as it could fuel expectations of tighter liquidity conditions,” Vlad Muscalu, a senior economist at ING Groep NV in Bucharest, wrote in an e- mailed note today.

Germany’s Federal Constitutional Court in Karlsruhe will decide tomorrow whether to halt the country’s participation in the 500 billion-euro ($640 billion) European stability Mechanism, the euro-area’s permanent bailout fund. Romania sends about 74 percent of its exports to the European Union countries.

To contact the reporter on this story: Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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