Serbia’s C-bank Steps in To Support Dinar for First Time Since February

The central bank sold 42 million euro ($62.5 million) at 96.20 dinars per euro to slow the dinar's fall and boost market liquidity, a central bank spokesman told SeeNews.

The dinar was trading at 97.50 against the euro, weaker than 95.90-96.20 at Thursday's close before NBS stepped in at around 2 p.m.  local time (1300 GMT), a bank dealer said, adding demand for dinars on behalf of banks’ clients was very weak.

The central bank, NBS, set its average reference exchange rate for Monday at 96.5657 dinars per euro, compared with 95.7965 for Friday.

“The central bank won’t intervene if the daily oscillations are below one percent. Today they were, so it stepped in,” the NBS spokesman said. 

Another commercial bank dealer told SeeNews he expects the dinar to continue sliding in the following days with NBS intervening occasionally in its support to tame the fall.

The dinar has been weakening slowly against the euro since late October before speeding up its descent in the last 15 days, NBS data showed. It has lost about a fifth of its value since the end of the summer of 2008.

NBS bought and sold euro on a regular basis between the end of October 2008 and late February 2009 to prevent excessive daily oscillations of the exchange rate.

Last month, NBS cut to 20% from 25% the portion of mandatory reserve requirements on euro liabilities that commercial banks have to maintain in Serbian dinars, aiming to release dinar liquidity to banks and bring that portion back to its pre-crisis level.

($=0.6721 euro)