ZAGREB: Croatia's central bank sold 131 million euros ($173.46 million) to commercial banks on Thursday in its third venture into the local foreign exchange market this year to counter depreciation pressures on the national kuna currency.
The kuna has been under pressure this year due to repayment of foreign debt by local firms, weak exports, rising provisions for bad loans and lower inflow of hard currencies.
The average rate at the auction came to 7.5793 kuna per euro, the central bank said.
The kuna firmed a touch to 7.57/7.58 per euro from 7.58/7.59 where it had stood before the intervention, and analysts said it could now stabilise for a while as the central bank doesn't want the currency to strengthen too much, either.
"The central bank apparently wants to keep the kuna below the 7.60 level to the euro. Demand for euros in the first months is usually stronger than offers and that keeps the pressure on. Kuna liquidity is also under strain, which may now push up local money market rates," a dealer at a major bank said.
"The rate could stabilise now at 7.58 kuna per euro, at least in the shorter-term," the dealer added.
In the three interventions this year the central bank has sold a total 458 million euros to banks. It also raised the kuna mandatory reserve rate to 15 from 14 percent, thereby tightening the amount in circulation, in another effort to defend the kuna exchange rate.
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