"Every successful man I have heard of has done the best he could with conditions as he found them, and not waited until the next year for better." - Edgar Watson Howe

FOREX MARKET
On Friday, the single currency was bided at 3.2000 level at the opening of the forex session, but within several minutes the euro fell below this zone. The sudden rise of the overnight interest rates, has determined hard euro selling, as the commercial banks sold the euro to finance their RON reserves. Therefore, the domestic currency surged to new heights which had not been reached since October 2002, as it was quoted at 3.1550 bids the most. However, the single currency recovered some of its earlier losses in late trading, rising up to 3.1700 area.
On June 25th, the Romanian forex market opened at 3.1730 level where it seems to have found stability, as the exchange rate ranged less than 30 pips in either in the first hours of trading.
The release of US Philadelphia Fed survey which posted the strongest rise since April 2005, had increased chances that the Federal Reserve might be keeping the benchmark rate at 5.25% this year. Therefore, the EUR/USD eroded the 1.3440 resistance zone on Friday, rising up to 1.3470 zone. JPY remained under pressure on Monday, as investors kept on selling the currency to finance the carry trades, pushing the yen near a 4-1/2-year low against the greenback and a record low against the euro. The EUR/USD has been quoted in the 1.3440-1.3470 zone in Asian and early European trading.

MONEY MARKET
On Friday, the Romanian money market opened in the 4.5/8% zone, but within less than one hour the asks for the ON maturities surged until 20% level, while bids climbed up to 12% level. The sudden rise of the ON yields was induced mainly by high off-shore demand for RON, as foreign players need to finance their RON positions. Also, the commercial banks needed domestic liquidities to constitute the remaining of the reserve requirements. In late trading, the overnight interest rates fell slightly to 12/16% bids/asks, after the shock in the market had eased down.

On June 25th, the overnight maturities were quoted in the 7.5/8.5% zone at the opening of the domestic trade, but they rose within less than one hour to 9/14% bids/asks, mainly due to the high demand for RON of the foreign players to finance swaps operations. Today, the National Bank will be holding monetary policy meeting and it is likely to continue cutting the key rate for the fourth time in a row this year. We expect that NBR will reduce the policy rate by 0.25% to 7.0%, as recent evolution of the headline inflation demands prudence, whereas the NBR will try to curb the sharp appreciation of RON vs. the hard currencies.