FX reserves and IFEM movements in February

Gross NBS FX reserves amounted to EUR 11,398.3 mn at end-February, up by EUR 51.9 mn month-on-month and by as much as EUR 1,607.2 mn year-on-year.

Source: nbs.rs

This level of gross FX reserves covered 187% of money supply (M1) or more than five months’ worth of the country’s imports of goods and services (almost twice the level prescribed by the standard on the adequate level of coverage of the imports of goods and services by FX reserves).

Net FX reserves (FX reserves less banks’ FX balances on account of required reserves and other requirements) equalled EUR 8,960 mn, which is somewhat less than a month earlier when they stood at EUR 8,978 mn.

The increase in gross FX reserves in February is largely attributable to successful FX reserve management, grants, the usual bank activity with regard to FX reserve requirements, and other sources (EUR 104.1 mn net). A boost to FX reserves also came from market factors (EUR 53.5 mn).

These inflows fully compensated for the outflows – a net outflow of EUR 90.0 mn associated with NBS activity in the local FX market (outflow of EUR 120.0 mn under additional swap auctions – operations which led to an increase in FX reserves in January, and inflow of EUR 30.0 mn оn account of NBS purchases in the IFEM) and a net outflow of EUR 15.7 mn relating to government debt repayment and other grounds.

Trading volume in the IFEM amounted to EUR 433.6 mn in February, down by EUR 61.3 mn from the month before. In the first two months of the year, the IFEM trading volume totalled EUR 928.5 mn.

The value of the dinar rose against the euro by a nominal 0.2% in February, while staying almost unchanged since the beginning of the year. Against the backdrop of appreciation pressures, the NBS intervened in the IFEM by purchasing EUR 30 mn in February, in order to ease excessive short-term volatility of the exchange rate.

With a view to enabling the banking sector to gradually adjust to improved liquidity in the money market in the wake of the additional two-week swap auction, organised for the first time this year on 28 January, the NBS held two additional EUR/RSD swap auctions in the course of February.

In the auction held on 11 February, the NBS swap bought EUR 110.5 mn from banks, supplying them with dinar liquidity in the amount of RSD 13.1 bn for a period of two weeks, whereas in the auction held on 25 February, it swap bought EUR 70 mn, supplying banks with dinar liquidity in the amount of EUR 8.3 bn.

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