The Bucharest forex market has registered a new liquidity record high in May, with the value of cumulated transactions climbing to 26.9bn euros.
The all-time high reached in May exceeds the record high registered in March, of 23.3bn euros, a level that was almost reached in April, as well.
Against the same period last year, the volume of transactions on the Bucharest forex market signals a significant increase of 78%, from 15bn euros. Last spring, 11-14bn euros were traded each month.
The increase in market liquidity was fuelled by the ever-stronger presence of non-resident players.
As a matter of fact, domestic dealers have become familiar with non-residents plotting the course of the market.
As a result, the market fluctuates depending on the orders placed by foreign clients, and dealers often go by a regional feeling, looking at the development of the Polish zloty, or the Hungarian forint as to get an indication as to the direction RON/EUR quotes may take.
The rise in liquidity, in May, was registered in the wake of the return of foreign speculative players on the emerging markets. In April, speculators had closed part of the positions they held on emerging markets so as to avoid stronger risks.
The domestic currency remained unharmed by the cash outflow - taking into consideration that the domestic currency market's very low liquidity generated a considerable increase in the interest rate.
Thus, speculators favoured maintaining their RON positions, or even making new placements resulting in the foreign exchange rate registering a slight decrease in April. In May, quotes registered a steeper decline and fell below the support level of 3.3 RON per euro, amid high foreign currency sales, when speculators returned to emerging markets.
In recent months, the RON has proven more resilient to depreciation than neighbouring currencies, by gaining ground at a faster rate when capital inflows are registered. Analysts believe that this characteristic is a result of the still small size of the domestic market, which makes the emergence of a significant correction more complex.
With a daily volume of 1.2bn euros, the Bucharest forex market is still very low compared with other neighbouring markets.
On the other hand, domestic banks' dealers note that the major non-resident clients increasingly choose to set RON quotations directly between themselves on offshore markets. However, the NBR does not take these transactions into account.
Thus, the total volume of foreign currency transactions, which involves the domestic currency, tops 27bn euros.
However, offshore market transactions continue to have an impact on the trend of the quotes on the Bucharest market.
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