During their regular repo auction on Wednesday, the Croatian National Bank (HNB) accepted an offer from the commercial banking sector worth 4,25 billion kn with an interest rate of 6%, while also declining another similarly valued offer.

The interest rate changed from last week’s auction, when the HNB accepted only 4,76 billion kn out of 7,94 billion kn offered. The central bank intervened on the foreign exchange market for the second time this year, in order to prevent the further weakening of the Kuna exchange rate. They sold 184,72 million Euros to commercial banks at an average exchange rate of 7,440584 Kn/Euro, which resulted in the withdrawal of 1,37 billion kunas from the market. It was also decided to lower the minimum hard currency deposits from 25,5% to 20%, which released another 1,25 Billion Euros (9,3 billion kunas). The market was impatiently awaiting the announced auction, which largely affected not only interest rates, but also the exchange rate. The present liquidity status of the banking system is holding interest rates at high levels (before the auction the Zibor rate was 15,90% for overnight loans and the Zagreb capital markets had rates up to 19,02% for overnight lending). Therefore, the market is expecting a partial relaxation after the decisions by the Croatian National Bank. The last time that the HNB intervened on the hard currency market was 23 January by selling 328,3 million Euro at the average exchange rate of 7,401083 Kn/Euro, which released approximately 2,43 Billion Kunas.
(Večernji list)