Barclays expects the National Bank of Romania to maintain the euro-Romanian leu exchange rate near current levels in its base case scenario. The central bank utilizes the exchange rate as a critical anti-inflationary anchor, as domestic inflation remains elevated. This policy approach is designed to stabilize price expectations and control broader inflationary trends within the economy through exchange rate management.
Political uncertainty surrounding the appointment of the next prime minister is expected to keep the leu under pressure in the near term, according to the bank’s foreign exchange views. The Romanian currency may experience another leg of depreciation if the president announces snap elections. Such an event would add to existing pressures on the leu, potentially destabilizing the currency further. The ongoing political transition represents a key risk factor for the exchange rate dynamics in the region.
From a valuation perspective, the leu continues to screen expensive on both a real effective exchange rate and behavioral equilibrium exchange rate model basis. Barclays noted that the currency is currently priced at levels that exceed its fundamental equilibrium, which may limit upside potential or expose it to correction mechanisms. The interplay between political risks and existing overvaluation creates a complex environment for currency traders and investors monitoring the region.