Serb Central Bank Posied to Purchase Euros to Steady Dinar

Serbia’s central bank remains poised to buy euros to steady the dinar, Governor Jorgovanka Tabakovic said.

The Belgrade-based Narodna Banka Srbije bought 5 million euros ($6.5 million) yesterday to smooth fluctuations and wants to bolster foreign-currency reserves, she said today in an address to the Foreign Investors Council.

“Maintaining the stability of the exchange rate is our primary task,” Tabakovic told the group of 130 foreign companies, which have together invested an estimated 17 billion euros and employ 88,000 people.

The bank bought euros for the first time since May 2011 to slow the rally in the dinar, bolstered by renewed foreign investor interest in Serbia’s bond market and increase in bank lending activity backed by state subsidies.

The dinar traded at 111.5509 to the euro at 3:25 p.m. in Belgrade, 0.7 percent weaker on the session, according to data compiled by Bloomberg.

The National Bank of Serbia is taking advantage of the firming dinar to somewhat replenish its foreign-exchange reserves, which fell to 9.9 billion euros at the end of August, to the lowest level in 14 months. Reserves contracted in the first half as the central bank sold 1.4 billion euros to slow declines in the dinar that were triggered by capital outflows.

The central bank raised its one-week repurchase rate by a quarter-point to 10.75 percent on Oct. 9, the fourth increase since June, to curb inflation.

Tabakovic said policy measures will remain focused on bringing inflation down to its target of 4 percent, plus or minus 1.5 percentage points, over the medium term.

Inflation will rise to “around 12 percent” by the end of 2012, driven by a “weak” farming season and an increase in regulated prices.

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

To contact the editor responsible for this story: Andrea Dudik at adudikova@bloomberg.net

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