BELGRADE: The Serbian dinar rallied to a two-month high versus the euro on Wednesday on increased investor interest, boosted by the country's recent deal with Kosovo that paved the way for a start of European Union accession talks this year.
The currency traded at 110.9 per euro at 1300 GMT, the first time it strengthened to below 111 per euro since mid-February.
"Positive political developments and an increased offer of euros on the interbank market, mainly by foreign investors, are the main reason for the dinar's strengthening," said a dealer with a Belgrade-based bank.
On Tuesday, the currency had traded at an average of 111.3, already stronger than the average of 111.7 against the euro last week.
The dinar posted gains after an EU-brokered deal on April 19 that settled relations between Serbia and its former province of Kosovo. The agreement also secured Belgrade a tentative green light for the start of EU membership talks this year, a move that should spur reforms and draw investors.
Analysts say the Serbian central bank, which keeps the dinar in a managed float to the euro, may now intervene to prevent its excessive strengthening.
"I guess the expectation is that the central bank will intervene," said Timothy Ash, an analyst with the Standard Bank.
The bank last stepped in on Feb. 14, when it bought 5 million euros ($6.51 million) to halt the dinar's sharp gains.
The central bank sold a total of 1.3 billion euros in interventions last year and the dinar has been relatively stable since last October.
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