Short-Term Pain, Long-Term Gain

The Serbian dinar continues to weaken amidst heightened uncertainty over global credit markets, the central bank's interest rate cut of 25bps on September 29, and concern that Kosovo's independence (negotiated or unilaterally declared) after December 10, may compromise domestic and regional stability. The recent sharp depreciation of the dinar against the euro coincides with an across the board equity and currency sell-off in much of emerging Europe. The dinar broke through key resistance at RSD80.00/EUR on November 21, with a new immediate-term target of RSD84.50/EUR in sight.

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