Dollar to rise to 11.80 lei?

The National Bank of Moldova (NBM) is doing its best to enhance liquidity in the financial sector, Financial Brains director PhD Sveatoslav Mihalache has told Info-Prim Neo. The latest moves in this direction occurred yesterday, August 7, when the central bank cut the key rate from 8 to 7 percent. But even more important, in Mihalache's opinion, was the NBM's decision to lower the reserve requirements for the banks from 14 to 10 percent in a bid to improve lending and thus alleviate the difficult situation of the commercial banks. Additionally, the NBM intervened this week on the domestic forex trading market by purchasing dollars from banks, in an amount estimated by Financial Brains to be from 5 to 10 million. This way the central banks aims to increase foreign currency reserves in order to improve overall liquidity. Nevertheless, Financial Brains is certain about the impendency of the fact that, in two or three months, the Moldovan leu will depreciate against the US dollar to 11,70 – 11,80 lei. (See FX forecast for Aug. 3). As concerns the EUR/USD pair, the prediction that the European currency would retreat to a level around $1.4170 eventually came true. (See FX forecast for Aug. 4). After a tense week, during which the euro hit the year's record high of $1.4444, and then traded within an unusually narrow corridor, the long awaited fundamentals have brought the European currency back to a more or less natural course. This was partly due to the statements made on Friday by the European Central Bank chief Jean-Claude Trichet, and endorsed by most experts, who said that the euro zone was expected to recover by 2010. At the same time, the news about the rise in the U.S. salaries represented a sign about a potential halt in deflation and, consequently, a beginning of inflation, which, for its part, could mean a reduction in the base rate by the Federal Reserve. Starting next week forex players could shift their trading strategy to buying euros.