Analysts: Presidential election could increase Leu's short-term volatility, yet long-term effects minimal

Romania's upcoming presidential elections could increase the volatility of the domestic 'Leu' in the short term, yet the long-term impact will be minimal, shows a Currency Outlook by fintech iBanFirst, one of the main global providers of foreign exchange and international payment services.According to the document, the EUR/RON exchange rate has the potential to increase in the short term to 5.00 RON for 1 EUR, but a sustained increase of the euro next year is not expected."For the last months of this year and well into 2025, the driving force of foreign exchange markets and the entire financial system will be the normalization of monetary policy in both the EU and the United States. As central banks make moves to adjust their policies, the effects will significantly shape market sentiment and investment strategies globally. The Romanian presidential elections as well as the US presidential elections will have minimal long-term effects on the currency market. Other factors, including China's economic trajectory, weak liquidity across market segments, and geopolitical developments in the Middle East, remain unpredictable and could influence the market," shows the document.Analysts don't expect a significant drop in the USD/RON rate. Given the current strength of the dollar, if the rate approaches 4.44, it could trigger a technical rebound, similar to what occurred a month ago. This will drive investors to buy dollars again in anticipation of a rise, the report notes."As for the EUR/RON, there is short-term upward potential, with a target of 5.00. This is largely driven by lower bond yields, driving investors to put tactical bets on the euro in hopes of short-term gains. This also explains the recent increase in the EUR/USD rate. However, this trend is not expected to last, and analysts predict no sustained rise in the euro next year, including against the RON," the cited source said.On the other hand, if the U.S. election results are uncontested, analysts forecast the EUR/USD to fluctuate between 1.07 and 1.12 until the end of the year, with the exchange rate influenced in these months and next year by two key structural factors: solid U.S. economic performance and superior U.S. stock market performance.Founded in 2016, the Brussels-based fintech iBanFirst provides cross-border payment, foreign exchange and risk management services to trading companies, combining the capabilities of a state-of-the-art platform with the expertise of forex experts.