RSD/EUR: Record Lows Still In The Offing

After remaining firmly within a depreciatory trend channel since November 2009, the Serbian dinar has stabilised markedly against the euro in recent months, having continued to trade within the all-time low area of RSD99.50/EUR since February. While direct intervention on the foreign exchange market by the National Bank of Serbia was previously a key factor limiting losses beyond the psychologically important RSD100.00/EUR level, at this juncture it remains unclear whether the central bank will be willing to continue defending the unit over the coming months. Going forward, we stress that a firm push below RSD100.00/EUR would be a particularly bearish signal, presaging losses to new record lows in the RSD105.00/EUR area in the first instance.

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