The Slovak foreign exchange market experienced its first days with a free floating Slovak currency. As they can no longer trade with the central bank on the fixings, banks can cover their positions only on the free market at free market prices. The market thus remained illiquid with spreads of nearly one percent, with most banks holding more or less squared positions and only covering customer interest.
The week of October 8-15 saw local corporates selling rather than buying hard currencies in profit-taking or simply converting some hard currency loans. This resulted in the Slovak crown's strenghtening with the index moving down and touching the level of 9.5% below parity on October 12.
The crown mostly fluctuated between 10.5 and 13% below parity within the covered period, which meant that it was at levels that were 5-7% weaker compared to the last day before the central bank let the crown fluctuate freely.
The market is waiting to see how the central bank will intervene on the market, as it has promised an active approach in order to help create a healthy and transparent market environment.
On the money market, another fall in interest rates at the longer end of the yield curve gave no support to the crown, which is expected to be at weaker levels during the next weeks. As the central bank refinanced the market by adding short-term liquidity through repo tenders, the shorter tenures fell to 1-3% levels during last two days of the minimum reserve requirements period ending on October 15. The longer end of yield curve was offered between 30-35% with bids at 25%.
The Ministry of Finance accepted bids of up to 30% in a one-year auction of state treasury bills, accepting demand worth nearly 2 billion crowns.
19. Oct 1998 at 0:00 | Roman Petranský