- Four years of interventions pushed speculators from market
- Dinar has lost almost 25 percent against the euro since 2009
Serbia’s central bank has squeezed out speculators and stepped up market interventions, stabilizing the dinar and reducing currency-trading volumes since 2012, it said in a report.
Average monthly foreign-exchange trading volumes have dropped to 589.5 million euros ($667.5 million) this year from a record 1.63 billion euros in 2011, the National Bank of Serbia said in a report explaining its market operations from 2009 to 2016. The Serb currency has weakened 1.5 percent against the euro this year, the worst performance among emerging European peers following Turkey’s lira.
“Psychological factors that were creating undue pressure in the foreign-exchange market have been squeezed out,” the bank said by e-mail Thursday. “A clear signal was sent to market participants that the National Bank of Serbia is not targeting any level of the exchange rate but also that it will not permit excessive short-term dinar oscillations and threats to financial stability.”
The dinar lost 0.1 percent to 123.40 against the euro at 4:20 p.m. in Belgrade, its lowest level since July 22, data compiled by Bloomberg showed. The currency has weakened by almost 25 percent since 2009, when it traded at a level stronger than 77 against the euro.
The central bank has increased the frequency of its market interventions, which include both buying and selling euros, to offset dinar volatility. The bank has sold 870 million euros and bought 435 million this year in its managed float. While the International Monetary Fund has recommended the central bank allow greater dinar volatility, Governor Jorgovanka Tabakovic has rejected the advice.