The Serbian central bank purchased 48.5 million euros at an auction on Friday after the dinar appreciated 1.5 percent against the single currency a day earlier, dealers and traders said. The central bank has been buying or selling euros in the market to prevent excessive exchange rate swings.
On Thursday it bought 62 million euros, after the government said it planned to sell 21 billion dinars ($260.3 million) in a debut issue of six-month euro-indexed treasury bills on December 29 to refinance its debts. On Friday, before the auction, the dinar started trading at 104.64 to the euro, a tad weaker than 104.4 hit on Thursday, the dinar's strongest exchange rate in months.
"The central bank was purchasing at a median rate of 105.2 per one euro," a dealer with a Belgrade-based bank said. He said that more demand for dinars from investors can be expected in the coming days. "Christmas holidays in line with the Gregorian calendar will slow down trading by foreign investors, but local traders will definitely go for it."
Serbia's financing needs have increased since it agreed with the International Monetary Fund earlier this year that its 2010 budget deficit could widen to 4.8 percent of gross domestic product, from a previously agreed 4 percent of GDP. Branislav Toncic, the head of the government's debt agency said that the settlement for euro-indexed T-bills is scheduled for December 31 and maturity is set for July 1, 2011. "On top of yield, buyers will be offered a margin between settlement and maturity dates," Toncic said. The government was prompted to issue euro-indexed T-bills following the poor performance of its dinar maturities this year.
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