Serbia’s central bank monitors euro/dinar

BELGRADE – Serbia’s central bank said it was carefully monitoring the interbank forex market and would react only in case of turmoil or if it judged inflation would be affected. «The National Bank of Serbia is ready to react only if it sees signs of serious disturbances in the forex market or if the cumulative movement of the dinar approaches levels which can jeopardize defined core inflation target,» it said in a statement. The bank has said this year’s core inflation was expected at 4.5 percent, well within its 4-8 percent targeted band for 2007. The statement was issued after the dinar lost more than 4 percent in a week – its sharpest correction since May this year – on worries that political instability was denting the country’s image as an investment destination. The dinar traded at 81.30/81.40 to the euro much of the day, down from its Thursday’s official close at 80.8432. Some banks quoted it slightly higher at 81.13/81.27 after the statement. «The National Bank remains committed to securing a flexible, not rigid and functional foreign exchange market, as the best way to set the exchange rate consistent with the bank’s mandate to ensure low inflation,» it added. The worries, and the dinar fall, began on Monday, triggered by a lackluster opening round in the privatization of unlisted insurer DDOR, where only one of 11 potential buyers bid. Investors also cited fears of violence related to Serbia’s last-ditch negotiations over the future of its breakaway Kosovo province, where the ethnic Albanian majority demands independence.