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


Romanian fifty bani coins and leu bank notes © Davin Ellicson/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).

Chart of US dollar vs Romanian 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 euro vs Romanian leu

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?