Currency Corner: the Romanian leu – a currency that has fallen even harder than the pound

In this week's currency corner, Dominic Frisby takes look at the Romanian leu, which has, over the years, been something of a dog. Much like the pound, in fact.

Romanian fifty bani coins sit on top of assorted Romanian le

Bloomberg via Getty Images

I'm heading to Romania this weekend for the Transylvanian Crypto Conference surely the number one cryptocurrency conference in the whole of Transylvania so I thought it might be fun, and indeed interesting, to look at Romania's currency, the leu, in this week's Currency Corner.

At first glance I thought the roots of the word leu' might be the same as those of lira' and livre' once upon a time the currencies of France and Italy, and the former still the currency of Turkey today. That is to say, derived from the Latin word for pound, in these cases referring to a pound weight of silver.

But in fact leu' means lion. Unusual for a currency to be named thus. Normally a currency name derives from a weight as in "pound". Or it derives from something solid to do with the issuer "krona", "crown" and "franc" (meaning "from the king"). Or it derives from the metal in some way "guilder" means golden, "yuan" and "yen" both mean coin shaped.

Lion means something else. But there has long been a symbolic relationship between royal power and the king of the beasts, so I guess it's not that surprising.

Indeed, the old Dutch thaler was the "leeuwendaalder", which means "lion thaler". The name thaler lives on in the US dollar today. It'd much cooler if they were "lion dollars". I'll send a tweet to @realdonaldtrump.

Anyway, back to the matter in hand. There are 100 bani to a leu bani itself means money and roughly five leu will buy you a pound.

Perhaps the Transylvanian obsession with silver is related to the fact that the leu has over the years been a bit of a dog. I know this because I began the research for this article by comparing the leu to that other dog of a currency, the Great British pound.

In the three years since the Brexit vote, the pound has fallen by roughly 20% against the US dollar, going from circa $1.50 to $1.20. But over the same period the pound and leu have been more or less flat, trading in a narrow range between lei5 and lei5.50 to the pound. If anything the leu is a little down which takes some doing.

Here's the leu against the US dollar over the last ten years (the currency code for the leu is RON). In 2009 it took less than three lei to buy a dollar, but is has steadily depreciated so that today that number is closer to 4.4 lei.

The dollar has, of course, been in a secular bull market, but all the same the leu has lost over a third of its value (when the chart is rising the dollar is appreciating).

191011-CC01-leu

Here's the equivalent ten-year chart against the euro, which has not been as strong as the dollar. The leu has been depreciating against the euro, as well, in a similarly grinding fashion, though not to the same extent.

Back in 2009 there were roughly lei4 to the euro, compared to lei4.75 today. The falls are in the region of 15%.

Chart of Romanian leu vs the euro

Here is the leu against the once great British pound.

Chart of sterling vs Romanian leu

Unbelievable as it may seem to those caught up in Brexit forex myopia, the pound has actually appreciated against the lea over the last ten years. Back in 2009, £1 bought you lei4.5. In 2015, we got to lei6.4. Today we sit somewhere in the middle of the range, at lei5.3.

Bottom line: the leu, like the pound, is in a bear market.

For a country described as "a fast-developing, upper middle-income, mixed economy with a very high Human Development Index and a skilled labour force, ranked 15th in the European Union by total nominal GDP and tenth largest when adjusted by purchasing power parity", that's not so impressive. Not so much a lion as a pussy cat.

Maybe Romania secretly voted to leave the EU as well?

Recommended

We’re at another turning point in the 100-year cycle of money – here’s what to do
Currencies

We’re at another turning point in the 100-year cycle of money – here’s what to do

Money has always moved in 100-year cycles. And we’re at another turning point now, says Dominic Frisby – money has gone from gold to government-backed…
8 Dec 2021
The charts that matter: omicron rattles markets
Global Economy

The charts that matter: omicron rattles markets

Markets were rattled by the emergence of a new strain of Covid-19. Here’s how it has affected the charts that matter most to the global economy.
4 Dec 2021
The charts that matter: the US dollar keeps on strengthening
Economy

The charts that matter: the US dollar keeps on strengthening

The US dollar saw further rises this week as gold and cryptocurrencies sold off. Here’s how that has affected the charts that matter most to the globa…
27 Nov 2021
Turkey heads for a currency crisis as the lira plummets
Currencies

Turkey heads for a currency crisis as the lira plummets

The Turkish lira has lost 40% of its value so far this year after the central bank bowed to pressure to cut interest rates.
26 Nov 2021

Most Popular

Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021
Bubbles grow in global property markets as house prices continue to rise
Property

Bubbles grow in global property markets as house prices continue to rise

House prices grew by 6% in the year to mid-2021 in 25 global cities, with the German property market in particular showing signs of overheating.
3 Dec 2021
Making sense of the new minimum pension age rules
Pensions

Making sense of the new minimum pension age rules

The rules surrounding the minimum age at which you can start tapping into your retirement savings have been tweaked, but are still confusing. David Pr…
23 Nov 2021