June 20, 2017 / 11:20 AM / 2 months ago

UPDATE 1-Serbian central bank buys euros to rein in dinar gains, dealers say

(Adds quotes from central bank governor)

BELGRADE, June 20 (Reuters) - The Serbian central bank purchased an unspecified amount of euros on Tuesday to weaken the dinar, which rallied on strong demand for the domestic currency and low market liquidity, dealers said.

The bank, which has bought 280 million euros ($312.45 million) so far this year, stepped in as the dinar traded at 121.7 to the euro, dealers said. After the intervention, the dinar weakened to 121.82 to the euro at 1000 GMT, Reuters data showed.

In remarks carried by the Belgrade-based newspaper Blic, central bank Governor Jorgovanka Tabakovic said that the dinar rally stemmed from balanced supply and demand on the currency market, an increase of exports, rise of euro-indexed assets of banks and lending.

"We expect no major turbulences in the currency market," the Blic quoted Tabakovic as saying.

Demand for Serbia's dinar-indexed maturities, which come with lucrative interest rates, also played a role, she said.

On June 13, Serbia had raised 7.22 billion dinars in two-years T-bonds, yielding 4.65 percent.

$1 = 0.8961 euros Reporting by Aleksandar Vasovic; Editing by Larry King

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