Latvia makes biggest weekly lats purchase since 2006
19.11.2008, 18:13
Latvia's central bank made the biggest
weekly purchase of the country's currency in at least two years to support the
lats after it weakened to the limit of its trading band, the bank said on its
Web site, Bloomberg reports.
The central bank bought LVL 189.8 mln for euros in the domestic foreign
exchange market last week, after the currency fell to 0.7098 against the euro
for the seventh consecutive week. The currency is allowed to rise or fall 1
percent from a midpoint to the euro.
Europe's emerging markets have been ravaged by the global financial crisis as
investors, stung by losses in developed countries, sell developing-market
assets. Latvia took over the nation's second-largest bank, shaking confidence in
its banking system while the country goes through Europe's worst recession,
prompting concern that the lats may face devaluation.
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"here is no basis and no reason for a devaluation," Prime Minister Ivars
Godmanis said today on Latvijas Neatkariga Televizijas. "That has no basis,
Latvia's central bank has really solid reserves.''
The Latvian government announced it was taking over Parex Banka AS on
November 8, after liquidity tightened and some depositors withdrew money. In
October, Latvia's 26 lenders lost about LVL 461 mln in deposits, or about
4.6 pct of the total, the Leta newswire reported on November 14.
The central bank has bought LVL 483.1 mln over the last seven weeks to
support the currency. It had foreign currency reserves of about USD 5.4 bln at
the end of October, which would cover more than four months of imports.
Local exchange companies had a sharp increase in clients seeking to exchange
lats for euros over the weekend and Independence day holiday, the newspaper
Telegraf reported, citing an industry executive. Demand was similar to levels in
February 2007, at a time of speculation about a devaluation, according to the
Russian-language newspaper.