Serbia’s central bank is considering action as the dinar hits 34-month high

BELGRADE (Reuters) – Serbia’s central bank said yesterday it would consider new policy moves to put the brakes on the dinar currency, which hit a 34-month high of 76.87/76.97 to the euro on ample liquidity. «We are very concerned about the dinar appreciation and the monetary board will discuss it at its next (October 29) meeting,» central bank Governor Radovan Jelasic told reporters. The monetary board will watch the dinar’s movements on a daily basis until October 29, to figure out where exactly the pressure is coming from, Jelasic said. Currency dealers said the money was coming from many quarters, including euro selling by Croatian investment funds which trade on the Belgrade Stock Exchange. «It has been mainly client selling. Some of it stems from cross-border credits that Serbian companies have to sell for dinars, some of it is the money for some pending non-financial sector acquisitions,» one dealer told Reuters. Jelasic said the central bank wanted to prevent massive daily currency swings, but would not go against the trend. «We must find a way to balance the dinar, but only after we see the October inflation rate.» Monthly core inflation, the central bank’s main concern, rose to a 21-month high of 1.1 percent in August and was a notch down at 1.0 percent in September. But at 3.3 percent year-on-year, core inflation remains below the lower end of the 4-8 percent band targeted for 2007. Jelasic said all policy options would be considered. The bank would not want to jump the gun and intervene before it became clear what measures would calm down the market. It last changed policy late in August, raising its benchmark 2-week repo rate by 25 basis points to 9.75 percent.