Dollar-buying frenzy calms in Lithuania

VILNIUS - The dramatic and unexpected increase in Lithuanians exchanging their litas for U.S. dollars appeared to be slowing down five days after it abruptly began. During the final days of August, long, snaking lines poured out of most currency exchange offices and banks. But the rush had practically dissolved by the end of September's first working week.

Many Lithuanian bankers attributed the sudden panic reaction of currency exchanges to the current economic crisis in Russia.

According to Alexander Federas, the director of Vilniuas Bankas' marketing department, the amount of money exchanged at the bank during the period was six times higher than usual.

"I think it was a kind of psychological panic," said Federas. "People may have been afraid that the crisis in Russia would affect the litas' exchange rate somehow, which didn't happen. I think comments of the government, the central bank and even our bank helped calm them. I just checked [Sept. 3] and there was no line."

Vilius Kavalauskas, the spokesperson for Bankas Snoras, also said that Russia's financial woes were what probably inspired the increase. Another possibility mentioned by some was that some ethnic Russians may have been exchanging litas into dollars in order to send it to friends or relatives in Russia, where the ruble commands virtually no trust.

For the most part, banks seemed to have had an ample supply of foreign currency on hand to weather the increased demand for dollars. Mindaugas Vaiciulis, director of the financial market department in Lietuvos Zemes Ukio Bankas (Lithuanian Agriculture Bank), said his bank's selling price of dollars has increased only slightly. In smaller towns, he said the dollar was more expensive.

"In Vilnius, our bank was selling [each] dollar from 4.02 to 4.03 litas, which isn't much higher than the normal rate of 4.01," said Vaiciulis. "Other banks that did not have as much foreign currency established rates of 4.04 to 4.08 litas to the dollar. Of course, 4.08 is the maximum rate allowed by law (the litas is pegged to the dollar at a 4 to 1 ratio)."

As Russian and even some Latvian financial institutions reel, the tiny exchange frenzy in Lithuania has only helped to put banks on even more solid financial ground. Despite the crisis, Bankas Snoras raked in a profit of around 4 million litas ($1 million) in August, which considerably exceeded the bank's monthly average profit figures so far this year.

With the wobbly Russian financial situation causing no detrimental effects to the lita thus far, banks are expecting many of the dollars they gave out to be returned again.

"Unfortunately for those who exchanged their money, they will probably end up selling [their dollars] again for litas," said Federas sympathetically. "Only the banks will benefit."