March 14, 2012 / 1:22 PM / 6 years ago

Serbia's central bank sells euros to prop up dinar

BELGRADE, March 14 (Reuters) - The Serbian central bank intervened for a second consecutive day in currency markets on Wednesday to prop up the dinar, dealers and traders said.

“The central bank intervened with some 20-30 million euros ($26-39 million), but it could not push the dinar below the rate of 111 to one euro,” said a dealer with a Belgrade-based commercial bank who asked not to be named.

At midday on Wednesday, the dinar traded between 111.02 and 110.15 to one euro, the preferred foreign currency in Serbia.

“The bank started intervening both today and yesterday when the currency hit the level of 111 dinars to one euro, we can see they want to defend it at this particular level,” the dealer said.

The bank sold 10 million euros on Tuesday.

So far in 2012, Serbia’s central bank has sold 258.5 million euros to prop up the dinar which, since January, has fallen 3.61 percent against the euro.

Last week, governor Dejan Soskic said the bank would keep intervening to prevent excessive daily fluctuations but that Serbia would maintain a floating exchange rate policy.

The dinar started to weaken last December on the back of portfolio investors’ concerns over the freezing of Serbia’s 1 billion euro ($1.3 billion) deal with the International Monetary Fund, U.S. Steel’s decision to abandon its steel mill in the European Union applicant country and political uncertainties over a May 6 parliamentary vote.

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