Latvian Lat Falls, Blondes Rally

A failed Latvian short-term debt auction on Wednesday made the Lat and other Eastern European currencies fall against the Euro and USD. The fear is that Latvia would devalue it's currency to spur exports due to the economic slump (Latvia expects -18% economic growth, budget deficit 8.2% of GDP -FT). This would make it harder for Latvian companies/consumers to service their debt or pay back loans denominated in other currencies (Swedbank -15.9% -FT). Nigel Rendell of RBC Capital had this to say about the country.

"Nigel Rendell, senior emerging markets strategist at RBC Capital Markets, said: “The country is in a mess with the economy expected to contract very sharply this year, while the budget deficit is horribly high. Devaluation looks very likely as a way of boosting exports and growth.” (FT.com)

Last thing we need right now is another interbank lending freeze which could spill into the Euro and US Dollar funding markets and bank CDS (which would ultimately lead to more Gov backstops). Latvia's CDS spread widened while it's Central Bank said it would keep the Lat pegged to the Euro (Bloomberg, Reuters).

USD/Latvia Lat (INO.com)
News Links:
Latvia, Lithuania, SEB CDS rise sharply-CMA (Reuters)
EU Warns Latvia on Budget Deficit Amid Crisis (WSJ)
Latvia auction flop sparks fears of struggle to find debt buyers (FT)
Baltic concerns take their toll of krona (FT)
IMF agreement on budget critical for Latvia-Fitch (Reuters)
Waiting for Latvia to devalue (FTAlphaville)
Make no mistake, the ‘Baltic Three’ are in the dock (FTAlphaville)
Latvia Finds Itself In Currency And Funding Crisis, Kills EM Rally (Zero Hedge)
Forint Falls Most in Three Months on Latvia Devaluation Concern (Bloomberg)

To stay up to date on currency pairs of Eastern Europe vs. USD I embedded live charts below from forexpros.com.

USD/Latvian Lat (Live)

Forex Charts Powered by Forexpros.com - The Forex Trading Portal.

USD/Hungarian Forint (Live)

Forex Charts Powered by Forexpros.com - The Forex Trading Portal.

USD/Polish Zloty (Live)

Forex Charts Powered by Forexpros.com - The Forex Trading Portal.

USD/Czech Koruna (Live)

Forex Charts Powered by Forexpros.com - The Forex Trading Portal.

USD/Swedish Krona (Live)

Forex Charts Powered by Forexpros.com - The Forex Trading Portal.
Blonde Latvian ladies rally to fight the financial crisis! Blonde Parade Lifts Spirits in Gloomy Latvia (Spiegel).