Tuesday December 2, 03:08 PM
UPDATE 1-Serbian cbank steps in as dinar sinks below 90 to euro
BELGRADE, Dec 2 (Reuters) - The Serbian central bank intervened anew on Tuesday as the dinar hit an all-time low against the euro after breaking through the psychologically important 90 barrier.
The intervention appeared to have limited impact, as the dinar traded afterwards slightly stronger than its low of 90.94 dinars per euro, the lowest euro-dinar rate ever.
'As far as we have noticed, there has been one round of central bank intervention,' a dealer said. 'Not more than 10 million euros, I believe. I think that the panic is driving the dinar down. The volume of trade is so low and the hike is pretty high, it doesn't make sense.'
The loss of about a dinar for the day against the euro follows Monday's central bank decision to keep its two-week repo rate at 17.75 percent. Experts say the worldwide economic crisis is a major reason for the currency weakness in Serbia, a county with a large foreign trade deficit.
'We do feel the effect of the crisis, naturally, this is one of them,' Milan Parivodic, a former Serbian minister of foreign economic affairs, told Reuters.
'Simply there is less money coming into the country (...). Less money in terms of investments, less money in terms of remittances. There is a feeling of insecurity and in that situation people simply buy euros.'
Parivodic said Serbians employed abroad could bring temporary relief by coming home during the holiday season and buying dinars. 'It should stabilise around 100,' he said, adding it was hard to predict the future course of the currency.
The dinar had traded at 89.88 on Monday according to the indicative course of the National Bank of Serbia. The dinar , has been among the biggest losers among east and central European currencies in recent months.
The central bank has spent more than 600 million euros since October to prop up the currency and provide liquidity in a market where trading has become much thinner than normal in recent weeks.
(Reporting by Adam Tanner and Ivana Sekularac; Editing by Patrick Graham/Victoria Main) Keywords: SERBIA DINAR/ Keywords: SERBIA DINAR/
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