Reuters: Market News: Serb dinar drops against euro, govt sees stabilisation

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Serb dinar drops against euro, govt sees stabilisation Apr 6th 2012, 12:53 BELGRADE, April 6 | Fri Apr 6, 2012 8:53am EDT BELGRADE, April 6 (Reuters) - Serbia's central bank intervened in currency markets three times on Friday in order to slow the dinar's decline against the euro after the domestic currency fell to 112.05, its lowest level in weeks, dealers and traders said. "The central bank is injecting liquidity into the market and interventions started after the dinar fell to 111.85 to one euro," said a dealer, forecasting the dinar would weaken further. By midday (1000GMT) the dinar, which has fallen by 4.27 percent against the single currency this year, had recovered to between 111.45 and 111.65 to one euro. The central bank last intervened on Wednesday with 10 million euros. This year it has used 445.5 million euros to prop up the dinar, as opposed to 2011 when it sold 60 million euros and bought 40 million euros. The bank manages the country's semi-floating exchange rate policy, intervening to prevent excessive daily oscillations or to add liquidity to the interbank currency market. Meanwhile on Friday, Dusan Petrovic, the trade minister in the ruling coalition, said he expects the exchange rate to stabilise soon. The coalition faces parliamentary and presidential elections on May 6. "The central bank has been making serious interventions in the past months and weeks, and it is important we have no major daily and weekly swings of the exchange rate," Petrovic said at a meeting with the Serbian Chamber of Commerce in Belgrade. Although a weaker dinar is favourable for exporters selling within the European Union, Petrovic said it was damaging for companies and households who borrowed in euros. Depreciation of the dinar accelerated in February after the International Monetary Fund froze a 1 billion euro ($1.33 billion) standby deal, saying it was unhappy with Serbia's spending plans for 2012 which envisioned breaching a 4.25 percent deficit limit agreed with the lender. The currency's decline has also been influenced by the decision of US Steel to abandon its steel mill in Serbia, and by political uncertainty ahead of the elections. Link this Share this Digg this Email Reprints

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