LATVIA’S CENTRAL bank yesterday rejected calls for the country’s currency to be devalued and pledged to defend the lat’s peg to the euro despite fears in financial markets that the crisis-hit country might soon be forced to abandon the fixed exchange rate.
“I am slightly angry at some so-called experts who are throwing around ideas and not really thinking,” said Martins Gravitis, at the central bank.
“The government and the central bank are unanimous on the peg being the cornerstone of our economic programme.”
Mr Gravitis’s assurance came amid nervousness in markets after Wednesday’s failure of a government debt auction.
The lat yesterday was close to the floor of its trading range against the euro and investors were betting on devaluation with interest rates on the currency of 70 per cent for three-month forward contracts, compared with 20 per cent last week.
The Lithuanian litas and the Estonian kroon, which are, like the lat, pegged to the euro, also remained under pressure.
However, fears of the turmoil spreading across eastern Europe declined, with the Polish zloty and Hungarian forint recovering some ground.
In Sweden, whose banks are heavily exposed to Latvia, the krona also recovered.
The markets drew comfort from European Central Bank president Jean-Claude Trichet, who said he expected the Latvian government to preserve its peg. But the International Monetary Fund and the EU were more cautious.
