The interbank forex market set a new record in the volume of transactions for February with 22.5 billion euros, four times higher than the monthly average of 2004 and 62% higher than the monthly average of 2006, according to the NBR data. "A significant share" of the volume traded on the forex market is due to speculative capitals the central bank believes.
The volume of foreign currency transactions exceeded NBR's foreign currency reserve (21.6 billion euros) for the first time in February.
After a sudden adjustment in September and October 2006, right after the full convertibility of the RON was announced, the inflows of foreign capital have supported a constantly upward trend of trading volumes. For instance, November witnessed a leap of 3.6 billion euros, only to have the increase in January stand at 4.4 billion euros. The Governor of the NBR, Mugur Isarescu, has been praising the forex market constantly deeming it the most functional of the financial markets.
Even though the complete deregulation of the capital account took place in September last year, many foreign investors waited until November, when the confirmation of Romania's accession to the EU on January 1 came, before they increased their exposures.
From October through February, the volume of transactions on the forex market increased by more than 10 billion euros, which showed in pressures for the appreciation of the RON unparalleled since the autumn of 2005, when the NBR had changed its intervention policy.
In January the pressures alleviated somewhat, but officials of the central bank stated early in February that the trend of the exchange rate was carefully monitored, fearing that an unsustainable pressure might mount, which comes with a high correction risk. In February NBR's fear translated into a cut in the monetary policy rate by 0.75%, followed by another cut of 0.5% to 8% at the end of March.
The central bank fears very volatile capitals the most, although it is not able to evaluate them accurately within the total foreign investment inflows.
Foreign direct investments amounted to only around 394 million euros in January, down over 44% compared with January 2006. At the same time, on the forex market the volume of transactions increased by more than 6 billion euros to 18.1 billion euros in January.
"The speculative component continued to account for a significant share of the transaction volumes on the forex market in January, even though the pressures put on the domestic currency alleviated somewhat," NBR states.
The effect of the capital inflows on the RON was easily visible despite fluctuations from one day to another, sometimes due to the moves investors made in the entire region.
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