The wild fluctuations in the Moldovan leu’s exchange rate against the euro and Ukrainian hrivna last week is a direct effect of the financial crisis and cannot be tempered by the National Bank of Moldova as this volatility is imported. The leu depreciated by 10% against the euro, but appreciated against the dollar to the highest level in the past two months. It increased in value by 1.27-3.96% a day. On the other hand, the national currency appreciated by 23% against the Ukrainian hrivna, which was losing its value. The Moldovan leu’s exchange rate against the US dollar is fixed so that any significant oscillation of its quotation against other currencies produces effects on the internal foreign currency market and exerts pressure on the businesses and economy in general. The currency risk persists. Hit by the crisis, the world markets are agitated and unpredictable. In such conditions, the National Bank, the Government and the companies do not have much space for maneuver if they do not cope with this currency risk. The risk rises because the currencies of Moldova’s main commercial partners – Russia and Romania - have been more stabile in an extremely agitate week. Yet, the Russian ruble has depreciated by 6% against the euro. Relatively stable compared with the Russian ruble, against which it depreciated by 2.2%, the leu remains rather stable compared with the dollar. Three factors determine this stability: remittances, foreign direct investment and incomes from exports, which rose significantly in 2008. The money sent by the Moldovans working abroad hit a new record in ten months – 1.399,06 billion US dollars, breaking the record of 1.218,30 billion US dollars set in 2007. The foreign direct investment over nine months increased by 70% compared with the corresponding period last year. The Moldovan leu is the second currency in the world, after the Czech crown, as it has gained 9.1% against the US dollar and 24.4% against the European common currency in the first eleven months of this year, a recent report by the Romanian Commercial Bank’s research department says. “Though the central bank’s major objective is to curb inflation, the attempt to balance the rate of inflation, the stability of the exchange rate and a low rate of interest contributed to fewer interventions aimed at stabilizing the exchange rate and the excess of liquidity," the authors of the report say. The central bank is more preoccupied with the appreciation of the leu than with a possible depreciation in the wake of the tendencies witnessed by the neighboring countries, said the National Bank governor Leonid Talmaci. Earlier last week, he said that the supply of currency is larger than the demand so that millions of dollars remain without a buyer. The National Bank, which intervenes and purchases currency from the market, cannot avoid the appreciation of the leu owing to the powerful foreign pressure on the exchange rate. There are yet signs that this pressure could diminish. The central bank’s data show that the remittances during August-September have decreased after reaching a record high of 180.79 million US dollar in July. Officials and experts do not rule out that next year the remittances could shrink, for the first time in the last eight years. The foreign direct investment and the incomes from exports would also fall. But these are only estimates as there is considerable uncertainty on the world markets and the authorities and experts avoid making long-term forecasts. The Ministry of Economy and Trade speaks about optimistic and pessimistic scenarios – the forecast regarding the foreign direct investment predicts inflows varying between 0 and 700 million US dollars. The next three-four months will probably show where the economy is heading for. So, the supply of foreign currency could diminish. On the other hand, the demand could also decrease as the prices of imported goods and the imports might also drop. The next months will be marked by uncertainty. Under such conditions, the currency risk would be very high in continuation, while the last week situation, when the Moldovan leu plunged against the euro and appreciated significantly against the Ukrainian hrivna, could repeat anytime. The violent changes in the exchange rate affect the exporters and importers. It seems that the population became more precautious and deposit less money. The Moldovans in November deposited in banks by 9.8% less currency than in the previous month, when the sum of deposits was by 19.2% lower. At the end of last week, the euro started to decrease in value against the dollar (on December 19 it depreciated by 4.63% against the dollar, according to the European Central Bank), so that we could witness a sudden change in the leu-euro exchange rate at the start of this week.