Serbian Central Bank Bought Euros to Slow Dinar Gains

Serbian central bank bought euros for the first time since October to slow gains in the dinar.

The Belgrade-based Narodna Banka Srbije purchased 5 million euros ($6.68 million) from commercial banks today to “smooth the dinar’s intraday swings,” the regulator said on its website without giving any further details.

Three currency traders in Belgrade who asked to remain unidentified, in line with the policies of their banks, said the central bank was buying euros at levels between 111.35 and 111.65 dinars after the dinar strengthened to 110.7652 to the euro by 10 a.m., appreciating almost 0.8 percent on the day.

The dinar has advanced because of tight monetary policy, with the central bank raising its benchmark interest rate seven times since June by a total of 200 basis points, or 2 percentage points, to 11.5 percent, to bring inflation back to the target of 4 percent, plus or minus 1.5 percentage points by the end of 2013. The inflation rate stood at 12.2 percent in December.

Banks priced the dinar at 111.3142 at 5:36 p.m. in Belgrade, according to data compiled by Bloomberg.

The central bank last bought 5 million euros on Oct. 15 to curb the currency’s appreciation.

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