The Latvian Government sold lati after the currency reached its trading band limit, being the first sell since the month of November, as the nation moved closer to get the next tranche of a billionaire loan to rescue the weakened Baltic economy.
According to the Latvian central bank website, 111.7 milion lati were sold to private financial institutions in order to prevent the lats currency rally to continue. The amount sold, equivalent to $222.6 milion, helped the euro to strengthen 0.7 against the lats, which has its limits artificially controlled within a trading band, a requirement for the Baltic nation to adopt the euro during the next years. Latvia is immersed in the most severe recession since its independence from the Soviet Union, and the government is struggling to avoid bankruptcy, cutting its budget sequentially, in order to get the necessary loans to rescue the economy and avoid a financial chaos in Latvia.
Currently the lat is pegged to the euro with a very limited fluctuation band, but since Latvia has been struck with the most severe recession among the European Union countries, the government has been forced to ask for external financial help, which came of course, followed by a series of requirements from international financial institutions to rescue Latvia with billionaire loans. According to specialists, the mid-term future of the Baltic nation will remain grim, as the annualized numbers for the country’s economy show that it has contracted 18 percent in the first quarter.
EUR/LVL climbed to 0.7025 from 0.6963 as of 11.13 a.m. GMT.
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