March 12, 2020 / 12:21 PM / 18 days ago

UPDATE 1-Croatia central bank steps in again to curb kuna losses

(Adds details, updates exchange rate)

ZAGREB, March 12 (Reuters) - The Croatian central bank said on Thursday it had sold 347.8 million euros ($389.95 million) to commercial banks in its second auction this week to counter depreciation pressures on the national kuna currency.

It said it sold the euros at an average rate of 7.5540 kuna. The kuna was quoted at 7.5650 to the euro after the intervention, from around 7.5800 quoted in early trading.

Earlier this week, the central bank sold 387 million euros to commercial banks when the kuna slipped from around 7.51 to around 7.56 to the euro.

According to market participants, the depreciation pressures in recent days were due to an increased demand for euros needed for dividend payments and for recent refinancing of the state domestic debt partly denominated in the euro.

Another major factor includes expectations that an inflow of euros could be lower in the coming weeks or months amid the ongoing coronavirus pandemic.

Croatia relies strongly on hard currency tourism receipts as the sector accounts to close to 20% of the economy.

Croatia has 19 cases of coronavirus infection, all involving people who had recently visited Italy, Germany or Austria.

“It is difficult to say whether these interventions will now suffice to ease depreciation pressures,” said a foreign exchange dealer at a major bank.

In the last almost five years the kuna has been exclusively exposed to appreciation pressures.

The central bank keeps the kuna in a managed float regime and usually it fluctuates at betweeen 7.3 and 7.7 kuna to the euro. Croatia wants to adopt the euro in 2023 or 2024.

$1 = 0.8919 euros Reporting by Igor Ilic; Editing by Bernadette Baum

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