ZAGREB, Sept 2 (Hina) - By selling euros last Wednesday the Croatian National Bank (HNB) intervened in the currency market for the third time in August trying to cushion depreciation pressure on the domestic currency,which came
earlier than expected. The central bank sold at an auction 195.8 million euros at the mean rate of exchange of 7.60 kuna for one euro, which is the highest amount in relation to the two earlier interventions. In the three August interventions the HNB sold more then 410 million euros to business banks. On August 9 the central bank sold at a currency auction 60.85 million euros at the mean exchange rate of 7.414 kuna and on August 21 it sold 153.6 million euros at the mean rate of 7.50 kuna. The depreciation of the national currency, which has been reported over the past several weeks, having started earlier than usual and after significant appreciation between late Ap
ZAGREB, Sept 2 (Hina) - By selling euros last Wednesday the Croatian
National Bank (HNB) intervened in the currency market for the third
time in August trying to cushion depreciation pressure on the
domestic currency,which came earlier than expected.
The central bank sold at an auction 195.8 million euros at the mean
rate of exchange of 7.60 kuna for one euro, which is the highest
amount in relation to the two earlier interventions. In the three
August interventions the HNB sold more then 410 million euros to
business banks.
On August 9 the central bank sold at a currency auction 60.85
million euros at the mean exchange rate of 7.414 kuna and on August
21 it sold 153.6 million euros at the mean rate of 7.50 kuna. The
depreciation of the national currency, which has been reported over
the past several weeks, having started earlier than usual and after
significant appreciation between late April and late July, has been
caused to some extent by the conduct of some banks and companies,
which have been trying to make profits from differences in the
exchange rate.
The initial drop in the value of the German mark, i.e. the
appreciation of the kuna, was caused, among else, by the fact that
the government was hurriedly selling currency from bonds issued
abroad to cover budgetary needs. At the time when the value of the
German mark dropped, some banks started selling it hurriedly,
increasing the offer on the currency market, so that the kuna
appreciated even more at the peak of the tourist season and the mark
sank even lower.
Tourist companies had to sell marks because they
needed money for operation and banks and some companies started
buying the currency at the low exchange rate. The plan was clear: as
the tourist season approaches its end, the offer on the currency
market will fall, the German mark will go up again and one will be
able to make profit from exchange rate oscillations. According to
some reports, some banks counted on making 8% profits on the money
invested in the purchase of the currency in only one month.
However, the HNB started selling currency as well, in order to
prevent the expected increase in the price of the euro, i.e. German
mark.
By selling currency the central bank was increasing the currency
offer and by withdrawing the kuna decreasing the demand.
Some sources in the banking sector say this will not stop the
depreciation of the kuna, because the HNB has not sold enough
currency. The central bank says its current reserves of USD 4.27
billion (almost a billion dollars more than last year) will make
room for all the measures it should find useful in protecting the
stability of the kuna. In order to curb the banks' speculative
conduct, the central bank has decided to reduce the allowed
percentage of a bank's currency position exposure in relation to
its liable capital from 25 to 20% and cancel the privileges of some
banks due to the public debt, i.e., depositors' currency savings
claims. The decision went into force on September 1.
(hina) rml