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[December 28, 2006]

Slovak c.bank intervenes against record-strong crown

(Czech News Agency Via Thomson Dialog NewsEdge) Bratislava, Dec 28 (CTK) - The National Bank of Slovakia (NBS) intervened on the forex market today against the fast firming national crown currency that set another all-time high at Sk34.06 per euro in morning trade, NBS spokesman Igor Barat confirmed to CTK. The unit weakened to Sk34.35/EUR shortly after the central bank's move. "The reason behind the intervention is the overly fast strengthening of the crown on the market," Barat said. Some dealers had expected an action by the central bank, but were unable to predict the level at which the NBS enters the market. The crown has posted major gains in recent days amid low liquidity on the market. With low interest in trading, even small amounts traded can have a significant effect on the exchange rate. "Because of the low liquidity, the central bank did not have to use a large amount of resources for the intervention," said OTP Banka Slovensko dealer Juraj Mitosinka. However, he was unable to say how much money the NBS might have sold. The central bank will release details next year. Mitosinka did not rule out more interventions by the central bank if the pressure for fast gains of the crown resumed. "It seems that the NBS is ready to defend Sk34 per euro," he said. Investors will therefore probably be more cautious when buying crowns, he added. After reaching the new record, the Slovak currency was 11.5 percent from the central parity of Sk38.455/EUR set when the country entered the exchange rate mechanism ERM-II last year. Within the ERM-II where a currency has to stay for at least two years before the planned euro adoption, the crown can move a maximum of 15 percent in both directions from the parity. Slovakia plans to introduce the single European currency in 2009. Today's move was the central bank's first intervention against the national currency this year. But it intervened on the market in June and July to support the weakening crown affected by uncertainty after parliamentary elections and concerns of investors that economic reforms would be cancelled. cjl/er

Copyright 2006 CTK Czech News Agency. Source: Financial Times Information Limited.

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