Serb Dinar Hits 5-Month High on Rising Credit, Risk Appetite

Serbia’s dinar strengthened to its highest level in five months as banks step up credit activity backed by government subsidies amid increased investor appetite for the currency.

The dinar gained 2.4 percent on the day, to trade at 111.9975 to the euro at 3:56 p.m. in Belgrade, its biggest daily advance since Dec. 8, 2008, Bloomberg data show. The currency traded at its highest level since May 4 this year.

“It’s a mix of reasons, including domestic credit activity and one analyst recommendation this week,” said Ljiljana Grubic, analyst at the Belgrade-based Raiffeisenbank AD. “Many funds which had been inactive during the summer now need to meet their targets and have been looking for markets that offer decent profit.”

Societe Generale said two days ago that the outlook for the dinar is improving and issued a “sell” recommendation at 114 dinars to the euro.

With today’s gains, the dinar is the world’s best performing currency this month, gaining 3 percent against the euro, Bloomberg data show. It is still 4.45 percent weaker than in January.

“It is obviously difficult to attach precise timing to the turnaround point; our broad view is that we are roughly half way down the appreciation phase,” Moscow-based VTB Capital analysts wrote in a note to clients, adding that the dinar rally partly reflected an improvement in investors’ appetite for risk.

The government will offer 10 billion dinar ($115.73 million) of three-year bonds on Oct. 16 and a further 10 billion dinar of 53-week Treasury bills on Oct. 23.

The National Bank of Serbia has sold 1.4 billion euros ($1.8 billion) this year to slow the decline in the dinar and central bank Vice-Governor Veselin Pjescic said on Oct. 10 the impact of the currency’s depreciation was fading.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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