BELGRADE (Serbia), November 21 (SeeNews) – Serbia’s central bank, NBS, said that on Friday it sold 40 million euro ($50 million) in a third effort this week to prop up the local currency, which dealers said sunk to a record low against the euro in early trade.
Before the intervention the dinar traded at 88.3687 per euro and after the intervention it firmed to below 88.00 per euro, NBS said in a statement.
However, the dealers told SeeNews that NBS stepped in after the dinar reached a historic low of 89.00 to the euro.
“The intervention didn’t help. The dinar went down to 87.10 to the euro after the intervention from 89.00, but quickly went up to 87.80,” a dealer told SeeNews and added that the bank stopped intervening at 1400 GMT on Friday.
“We thought that the bank would stop intervening when the dinar reached 84 to the euro. We do not know how far the bank will go to rescue the dinar,” the dealer said.
The dinar reached 84.00 to the euro in late October and the central bank has been stepping in regularly to prop it up since then.
Another dealer told SeeNews that people are buying foreign currencies because less foreign currency is entering the country through credit loans and foreign investments because of the global credit crunch.
“So, out of psychological fear, people are buying foreign currencies which is depressing the dinar,” he said.
Earlier in the day, dealers told SeeNews that the bank stepped in several times after the dinar reached 89.00 per euro.
“The market opened at 88.00-88.50 dinars per euro and is at the same level now [0940 GMT] but we already had the central bank stepping in as the dinar reached 89.00 per euro at one point,” a local dealer told SeeNews. He quoted Thursday’s dinar/euro close of 88.00-88.50.
A second dealer agreed, adding that there were probably two interventions.
On Thursday, NBS sold 30 million euro after the dinar reached an all-time low of 88.90 per euro in midday trading. The intervention firmed the dinar to 87.90 per euro but it eased again and NBS formed an indicative dinar/euro rate of 88.29 for Friday.
“I think the bank is protecting it [dinar] from this 89.00 dinar/euro level so if it loses more ground again probably they will react and form an indicative rate at the level of today’s,” the second dealer added.
NBS also sold 50 million euro on the local foreign exchange market on Tuesday to prop up the dinar.
