FX Reserves and IFEM Movements in January
Gross NBS FX reserves amounted to EUR 11,346.4 mn at end-January, up by EUR 84.6 mn from end-2018 and by as much as EUR 1,698.8 mn from end-January 2018. This level of gross FX reserves covered 181% 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 8,978 mn, which is EUR 124 mn more than a month earlier.
The increase in gross FX reserves in January is largely attributable to NBS activity in the local FX market – net inflow of EUR 75.0 mn (EUR 190.0 mn inflow from additional swap auction and EUR 115.0 mn outflow generated by the netting of interventions in the local FX market).
Other transactions that had a bearing on the balance of FX reserves in the course of January had an almost neutral effect (net inflow of EUR 0.5 mn) – inflows from grants, FX reserve management and other sources, almost entirely covered the outflows on account of usual bank activities with regard to FX required reserves, government debt repayment and other. The positive effect of market factors (EUR 9.1 mn net) also provided a boost to FX reserves.
January trading volumes in the IFEM amounted to EUR 494.9 mn, down by EUR 179.8 mn from the month before.
In nominal terms, the dinar lost 0.2% vis-à-vis the euro in January. Against the backdrop of depreciation pressures, the NBS intervened in the IFEM by selling EUR 130 mn in order to ease excessive short-term volatility of the exchange rate.
In conditions of reduced dinar liquidity surpluses, by the end of January the NBS organised an additional two-week EUR/RSD swap auction, in which it swap bought EUR 190 mn and supplied banks with dinar liquidity in the amount of RSD 22.5 bn for a period of two weeks.