BUDAPEST: The Romanian leu firmed up to 0.2 percent on Wednesday, edging away from 4-1/2-year lows, as Prime Minister Sorin Grindeanu's dismissal in a parliamentary no-confidence vote raised prospects of a stable governing majority.
Romania's ruling leftists overwhelmingly voted to oust Grindeanu's six-month-old government on Wednesday, opening the way for a new cabinet with a comfortable parliament majority over the next few weeks.
"Some political uncertainties have dissipated ... the no confidence vote revealed that there is a parliamentary majority that can support a new government, theoretically," said Ciprian Dascalu, chief economist at ING Bank in Bucharest.
The Social Democrat Party (PSD) and a coalition partner
withdrew support for Grindeanu a week ago saying he had failed to roll out their governing programme, leaving his fate in the balance.
At 1217 GMT, the leu was 0.15 percent stronger on the day, off earlier session highs. However, recent falls still left the unit the worst performer in central Europe, down 1.2 percent since the start of the year. Other regional currencies also firmed.
The forint was a shade stronger, pulling back from a one-month-low caused by Tuesday's decision by the National Bank of Hungary (NBH) to push more funds than expected from its three-month deposits into the economy to help cut borrowing costs.
The NBH, seen as the most dovish central bank in central Europe, also lowered its inflation forecasts for the next two years and affirmed its readiness to ease monetary conditions further if below-target inflation persists.
"This supports our call of limited HUF appreciation potential going forward as the (NBH) will remain reluctant to end its expansionary monetary policy," analysts at Raiffeisen Bank said in a note.
"We would expect to see HUF underperforming its peers PLN (Polish zloty) and CZK (Czech crown) over the coming months as their central banks are expected to tighten monetary policy earlier."
Before Tuesday's policy meeting, analysts polled by Reuters had forecast the Hungarian base rate staying unchanged at least until the second quarter of 2019.
Czech central bank Governor Jiri Rusnok was quoted as saying on Wednesday that the strength of the crown, trading on the strong side of its former cap on its value at 27 to the euro, could be a reason for a slower rise in interest rates.
A currency dealer said the crown was likely to stay in a range between 26.150-26.450 in the coming days.
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