"If you do your best, don't mind the rest." - Irish Proverb

FOREX MARKET
On June 25th, the National Bank of Romania reduced the monetary policy rate by 25 bps to 7.0%, as widely expected by analysts. NBR prefers to use the monetary policy rate as an instrument to curb the sudden appreication of RON against the hard currencies, rather than intervening directly in the forex market, unless NBR becomes deeply concerned about RON's appreciation, as the governor had reiterated lately in an interview. Although the Central Bank diminished the key rate by 175 bps since the beginning of 2007, the monetary policy maintained restrictive, as core inflation, adjusted for the effects of excise taxes on tobacco and alcohol, continued to drop to 2.7% in May from 3.0% in December 2006. By now, the headline inflation stands at 3.81%, that is below the inflation target of 4.0%, however NBR considers the �risks related to wage rises, a procyclical fiscal policy and to wider external imbalances which require the maintenance of a prudent monetary policy stance.
On June 25th, the Romanian forex market opened at 3.1730 level where it seemed to have found stability, as the exchange rate ranged less than 30 pips in either direction in the first hours of trading. However, later on the single currency underwent an upside bias up to 3.1800 area which held on yesterday, as some investors found this level as appropriate for opening new positions on RON.
On Tuesday, the single currency was bided at 3.1750 level at the opening of the domestic forex market and headed for 3.1800 zone which held on this time as well. RON found support in the high interest rates practiced on the Romanian money market, decoupling from its regional peers which depreciated vs. euro.
The EUR/USD remains rangebound in the 1.3440-1.3470 zone after thin economic releases on Monday. On June 26th, the market players will be watching the Consumer Confidence index for June and the New Home Sales for May to figure out the outlook of the greenback.

MONEY MARKET
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. The National Bank did not hold its usual one-month deposit auction, due to the recent scarce liquidity of the Romanian money market. On Tuesday, the overnight maturities are quoted for 10/13% bids/asks, as the frenzy for the domestic currency continues.