Serbian dinar is the second best performing currency in the world in the last 12 months which is, among other things, contributed to the fact that last month Serbian currency recorded the highest appreciation against euro in three years – Bloomberg reports.
The National Bank of Serbia surprised with its third unexpected interest-rate cut in eight months on, a further reason for investor optimism over local-currency bonds that have outperformed all of their regional peers this year.
Bloomberg also says that “Serbia is going against the tide of a gradual shift toward policy tightening across most of Europe since it has little need for rate hikes any time soon, with inflation slowing to the bottom of the central bank’s target range in February and continued appreciation in the dinar”.
“Sentiment is positive toward the bonds: they are increasing supply, and that automatically boosts demand for the dinar,” said Stephan Imre, a strategist at Raiffeisen Bank International AG in Vienna who recommends buying the notes. “This is a very good departure point for further easing.”
Inflation dropped dramatically to 1.5% last month, half the rate from December last year and a 15-month low. Weak price pressures will continue persist for months to come, and inflation will only gradually approach the 3% target in the middle of next year, policy makers said in a statement after Wednesday’s meeting.
Serbia’s dinar bonds have returned 5% this year in dollar terms, beating Hungarian and Czech bonds. The NBS Executive Board reduced the benchmark interest rate to 3.25% from the previous level of 3.5% percent at yesterday’s session.
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