Latvia sells 111.7 million lati, after currency reaches limit
15.06.2009, 10:50 The Latvian central bank sold lati for the
first time since November after the currency strengthened to the limit of its
trading band because of a lack of lati on the market, Bloomberg reports.
The central bank sold 111.7 million lati to commercial banks last week, after
buying 168 million lati in the previous week, the biggest intervention since
November. The bank both bought and sold lati in the second week of November,
when the country took over Parex Banka AS.
Latvia, like neighboring Lithuania and Estonia, is a member of the pre-euro
exchange-rate mechanism and pegs the lats to the common currency. Latvia defends
a 1 percent band around a target rate in a quasi-currency board that backs money
in circulation with foreign currency reserves.
The Baltic country is suffering the deepest recession in the European Union,
threatening to upset economic recovery in Sweden, whose banks are the biggest
lenders in the Baltic region.
Latvia’s government is planning 500 million lati in budget cuts this year so
it can unlock about 1.7 billion euros in loans from a group led by the European
Commission and the International Monetary Fund.