Serb dinar slides on worries about new government

BELGRADE (Reuters) – Serbia’s dinar and its main share index extended losses yesterday, hit by worries about an agreement to form a Socialist-nationalist coalition to run the capital, Belgrade. The dinar was quoted at around 82.00 to the euro at 1400 GMT, around 1.2 percent down on the day in thin trading. It had closed at 81.025 to the euro on Tuesday. «Volumes were leaner, but client demand was healthy,» a currency dealer said, adding that some euro buying came from oil, gas and telecoms monopolies. «But the dinar moved pretty much on sentiment.» Serbia’s Socialist Party has agreed a coalition with nationalists to form a local government for Belgrade, ending seven years of rule by pro-Western parties in the capital, which generates almost 40 percent of Serbia’s gross domestic product. National and local elections on May 11 left Serbia split between nationalists, led by the Radical Party, and liberals, led by the Democratic Party. The Socialists of the late Slobodan Milosevic hold the key to a coalition. The main index of the 15 most actively traded Serbian assets closed at 1,762.73 points or 1.81 percent down on Tuesday, with volumes driven by strong block trading. The Vienna-listed. SRXL index of eight Serbian assets tracked the trend, falling 2.26 percent down on the day. A new Serbian government must be formed by mid-September, and analysts are concerned that the formation of a Socialist-nationalist coalition in Belgrade could lead to a similar alliance at the national level. But the situation is unclear, as Socialists also appeared to be flirting with the pro-Western bloc to rule the country. «Considering a lack of clarity as far as the future Serbian government is concerned, the dinar is more likely to head toward 83-84 to the euro than toward 79-80 where it would be if a pro-EU coalition was announced,» a senior analyst said.