The Serbian central bank sold euros today to support the dinar, curbing its decline past 112 to the euro.
The Belgrade-based Narodna Banka Srbije said it sold 20 million euros ($26.4 million) to “enable the smooth functioning” of the market. The National Bank of Serbia has sold 608.5 million euros since the start of 2012 to prop up the dinar.
The “dinar downside may have gained more traction from political risks ahead of May 6 elections,” Zagreb-based Hypo Alpe Adria Bank d.d. said in a note to clients today, adding that repeated central bank efforts to curb the dinar’s weakness may lead to an increase in the benchmark interest rate “by 50-75 basis points in the next three months” since foreign-currency reserves “cannot be depleted forever.”
The bank left its two-week repurchase rate unchanged at 9.5 percent on April 12 and amended reserve-requirement rules, releasing foreign-currency liquidity and draining dinars to stabilize the Serbian currency and damp inflationary pressures.