A commentor on the last post mentioned the external debt issue. Romania's external debt has been rising and rising, which should cause the leu to fall at some point. But this hasn't happened yet. In fact, the leu has risen a little bit. (Against the euro. It's risen a lot against the dollar, but so has everyone else.) I think the reason for this is that the National Bank is talking tough on inflation. That is, they are LOUDLY saying that they won't allow inflation above 9% next year. What this means -- and what they're really telling the world -- is that if the leu falls, they will raise interest rates to defend it.
Now, as long as investors believe this, they will tend to keep their money in lei. This, in turn, tends to keep the leu strong. In other words, the Bank is "talking up the leu". The only problem with this is that sooner or later, if the external debt continues to rise, people will stop believing that the Bank will defend the leu. The only think that will convince them will be if the Bank starts to *really* defend the leu -- like, by raising interest rates. For what it's worth, though, I think that the Bank is doing the right thing. An interest rate increase will tend to slow business activity and growth. So you want to delay it as long as possible. So "talking up the leu" is a good, rational short-term strategy. As I mentioned a while back, the National Bank of Hungary didn't do this last year. They sent mixed messages. Sometimes they said reducing inflation was their top priority. That's how a National Bank says "we will raise interest rates to defend the currency". But then sometimes they said growth was the most important thing, which sounds more like "we will accept some inflation for better growth, so we probably won't raise interest rates". So they ended up with the worst of both worlds -- speculators attacked the forint, and they had to very suddenly raise interest rates quite sharply (from 9.5% to 12.5% in less than a month). The National Bank of Romania seems to have been paying attention to this. And that's good. Of course, if the external debt continues to grow, eventually it won't matter. The leu will fall, and the NBR will have to choose between inflation or higher interest rates. A cynic might suggest that "eventually" will arrive pretty soon after the election (late November). I guess we'll see.