Serbia's C-Bank Measures To Firm Dinar Seen Short-Lived – Dealers

As the central bank raised the key repo rate to 17.75%, the expectations were the dinar will strengthen towards the euro, a local dealer told SeeNews. “However, these expectations were met in the first half of the day and after that [the exchange rate] went back to where it started, at 84.30-84.20 dinars per euro.”

“There it has stayed in the past two hours and doesn’t move at all,” the dealer said around 1330 GMT. “There is liquidity, demand and supply, but the rate doesn’t change and nothing happens. The volumes are very, very low at this level as the rate did not move as expected.”

On Friday, the central bank (NBS) raised its key repo rate to 17.75% from 15.75%. The bank intervened on the foreign exchange market three times last week, selling a total of 106 million euro ($136 million) in an attempt to support the dinar and inject liquidity. Last Monday the dinar reached 86.00 dinars per euro, its lowest level since the beginning of the year, dealers said. It traded at little over 85.00 dinars per euro through the week and started firming on Friday.

“The rate did fall a bit following the central bank measures but no big change was achieved. It is now [1330 GMT] at the same level where it closed on Friday,” another dealer told SeeNews, adding that the dinar closed at 84.40 per euro on Friday.

“There is a pressure on the rate to fall but it is not something drastic, it is now 84.30 so we’ll see how things will develop,” he added.

Asked about forecasts for the dinar/euro rate, the first dealer said that there were no expectations these days. “All the signals we get don’t show as such in the long term. Not even in the short term, as in a period of 30 minutes something else happens.”

He added that the current volumes of some 15 million -20 million euro a day are ten times smaller than the ones during normal trading.

($=0.7798 euro)