December 4, 2018 / 11:10 AM / 9 months ago

UPDATE 1-Croatia central bank buys more euros to tame firming kuna currency

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ZAGREB, Dec 4 (Reuters) - The Croatian central bank said on Tuesday it had bought 494.7 million euros from commercial banks, taking its spending this year to tame appreciation pressures on its kuna currency to more than 1 billion euros.

It said it had bought the euros at an average rate of 7.4059 kuna per euro. The kuna slightly eased to 7.40 to the euro from the level of around 7.385 where it was quoted before the intervention.

It was the third intervention by the central bank on the local foreign exchange market this year. The previous was in May. Altogether, it has so far bought 1.22 billion euros from commercial banks this year.

“This seems to be a clear message where the central bank sees the level where the kuna should not firm any further at the moment,” a foreign exchange market participant said.

The central bank keeps the kuna in a managed float regime, allowing it to fluctuate roughly at between 7.3 and 7.7 kuna to the euro.

Due to the inflows of euros from tourism, EU development funds and rising exports, the bank mostly intervenes to stem the kuna’s appreciation against the single currency, rather than the other way round.

Croatia wants to adopt the euro within the next 6-7 years.

The central bank governor Boris Vujcic said last week Croatia could know as early as next year the exchange rate at which it would participate in the ERM-2 (European Exchange Mechanism), the waiting room for adopting the euro where a euro zone candidate country must spend at least two years. ($1 = 0.8770 euros) (Reporting by Igor Ilic; Editing by Alison Williams)

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