BUDAPEST/BELGRADE: Serbian stocks and the dinar gained on Friday, amid expectations Sunday's elections will keep a reform-minded government in power.
Other Central European assets fell, with the zloty plunging to an eight-week low against the euro.
The dinar rose 0.1 percent against the euro to 122.82 by 1115 GMT. With a 1.1 percent loss since 2015, it remains the second worst-performing currency in the region this year, after Poland's zloty.
The Serbian central bank, which has the highest interest rates in the region at 4.25 percent despite several cuts, has kept the dinar stable with market interventions.
It has sold 725 million euros this year - 85 million this week - to defend the dinar. The local currency has come under pressure because the pace of much-needed economic reforms has slowed before the April 24 elections.
Opinion polls show that Prime Minister Aleksandar Vucic, who has pledged to accelerate reforms and complete negotiations on joining the EU by 2019, is set to stay in power after the vote.
He has also promised to remain committed to spending cuts agreed in a loan deal with the International Monetary Fund, privatisations of loss-making firms and downsizing of the public sector and power utility EPS, even though such measures could lead to thousands of job losses.
The main index of the Belgrade stock exchange rose by 0.25 percent. Most indices in the region eased, led by a 1 percent loss in Warsaw.
The IMF plans to review Serbia's compliance with the terms of the loan deal after the elections .
"The dinar has been under control and I don't expect that we will see any significant change to one side or the other," said Branko Srdanovic, managing partner of Treasury Solutions, a Belgrade-based financial services company.
The zloty plunged 1.1 percent to 4.3572 against the euro.
Poland's 10-year bond yield rose 4 basis points to 3.01 percent. Yields on the corresponding bond in Romania, where concerns over loosening fiscal policy are similar to Poland's, was bid at 3.66 percent, the highest since early January.
"It looks like a risk-off move, but it is driven only by local risk factors. With Moody's, a Swiss franc loan bill and Brexit looming, investors decided to buy back their euros and dollars," a Warsaw-based currency dealer said.
Moody's may downgrade Poland next month. A planned conversion of Swiss franc mortgages may boost the costs of local banks. The Polish economy might suffer ifitish voters decide in June to quit the European Union.
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