CENTRAL BANK CURRENCY EXCHANGE SWAP TRANSACTIONS IN THE FOREIGN EXCHANGE MARKET OF LATVIA

Intervention by central banks, in terms of buying and selling foreign currency, has been a major activity in recent years. The intervention operations provide an opportunity for the commercial banks of Latvia to use foreign exchange reserves for the internal exchange market regulation, to reduce speculative interests and create confidence on the euro exchange rate stability in the future. In addition, which is very important in the research authors' opinion, these operations contribute to the further development of interbank market. The present research is aimed to explore the Bank of Latvia currency intervention transactions during the period from 2008 to September 2016, using data research and data processing methods. The results of the study reveal that the political situation in Latvia and throughout the world significantly impacts the intervention transactions implemented by the Bank of Latvia. Any currency intervention, which is related to another EU currency, shall be performed with the main objective - to maintain the price stability. The Eurosystem applies the currency intervention in close cooperation with the relevant non-euro area national banks. The currency exchange transactions allow stabilising prices, since a lower currency valuation may help improve exports and drive economic growth, while a higher currency valuation cause exports to be less competitive.