Euro hits a new record

The euro has risen to an official record high of 5.1998 RON, according to the National Bank of Romania (BNR), marking a new historical peak for the Romanian currency. The sharp depreciation of the leu is linked to rising political risk, as well as concerns over the economic outlook, including the potential partial loss of European Union funds and higher government borrowing costs.   The BNR announced an official exchange rate close to 5.2 RON per euro. Before the official 1:00 PM announcement, the euro had already surpassed this level on the market, briefly easing just below 5.2 RON shortly before the release—an indication of only limited intervention by the central bank.   The exchange rate continues to rise rapidly amid ongoing political instability in Romania. On the interbank market, the euro is trading around 5.20 RON, while the official BNR rate climbed to 5.1998 RON per euro, up 5.81 bani (+1.1%) from the previous level of 5.1417 RON.   Speaking to Digi24, tax consultant Dan Schwartz explained both the causes of the depreciation and its direct impact on households. He noted that the weaker leu immediately affects living costs, from utility bills to loan repayments. “These are things that affect us directly and immediately,” Schwartz said.   A stronger euro means higher costs for goods and services priced in foreign currency, including fuel, telecom services, and internet subscriptions. Imported food products also become more expensive, while travel abroad becomes costlier. According to Digi24 calculations, a €2,000 expense now costs 10,400 RON at an exchange rate of 5.2, about 400 RON more than when the euro was at 5.0. Monthly loan repayments in euros also rise: a €500 installment now reaches approximately 2,600 RON, about 100 RON more than before.   Schwartz suggested that the exchange rate is also influenced by the National Bank’s policy, which appears to involve less market intervention.“It would seem that the National Bank has decided to intervene less in stabilizing the leu-euro exchange rate, allowing the national currency to fluctuate closer to its real market value, determined by supply and demand. Demand for euros has increased recently and will likely continue to rise amid political instability,” he said.   He warned that pressure on the currency is likely to continue, with new record highs possible in the near future.“It is very possible that we will break a new record day after day. I am not optimistic about the stability of the national currency. It will probably continue to depreciate until the National Bank decides to intervene or until politicians understand that what they are doing is undermining Romania’s economic and social stability.” Schwartz also issued a strong message to the political class, calling for urgent reforms.“Romania needs reform as much as it needs air. Without reform, it risks suffocation. This is the main message the business environment is sending to the political class. Unfortunately, political games have become a factor of stagnation and regression for the Romanian economy. We must give up personal pride and Dambovita-style political fighting and focus on stability and predictability.”   Asked how far the euro could rise, the consultant warned that forecasts are highly uncertain but risks are significant.“As they say in such situations, the limit is the sky. You can never know how far the leu can depreciate, given how difficult it is to quantify the influencing factors. We have the war in Ukraine, tensions in the Middle East, global political instability, and on top of that domestic instability,” he said.   However, he outlined a possible psychological threshold. “It is possible for the euro to reach 6 RON in the foreseeable future. Over what timeframe is hard to estimate—it will depend heavily on political developments. If reforms continue and there is clarity, depreciation may slow. But if uncertainty increases, then no realistic forecast can be made.”   On Friday, when the Romanian market was closed, the euro briefly exceeded 5.20 RON in international trading. The leu is currently experiencing its sharpest depreciation in the past year, driven by the ongoing political crisis.   On Monday morning, shortly after the opening of the Bucharest market, the euro was trading at 5.1973 RON, similar to Thursday’s close, but below the 5.2170 level reached in international quotes on Friday while the local market was closed.