Press Release of December 30, 2004

The Bank of Latvia on December 30, 2004, has fixed the peg rate of the lats and the euro at 1 EUR = 0.702804 LVL, which will take effect on January 1, 2005 in line with the government approved plan for Latvia's preparation for full-fledged membership in the Economic and Monetary Union (EMU).

The exchange rate of the lats against the euro was calculated by applying today’s market rates set by the European Central Bank (ECB) to the SDR rates formula, similarly as it has been done every day since the beginning of 1994 when the Latvian currency was pegged to the SDR, the unit of accounting of the Internationally Monetary Fund (1 XDR = 0.7997 LVL).

As of January 2005 the Bank of Latvia will unilaterally limit the lats' exchange rate against the euro to ±1% of the central rate. The hitherto existing width of the fluctuation band against the peg currency, which is easy to understand and traditional in the financial markets, would thus be maintained. The actually fixed exchange rate regime, which has been favourable to the small open economy that Latvia is,  will not change.

After pegging the lats to the euro, the Bank of Latvia will set the daily lats exchange rates against other currencies according to the fixed lats/euro rate and the rates of the respective currencies at the particular moment.