FX Reserves and IFEM Movements in May
Gross NBS FX reserves amounted to EUR 11,655.6 mn at end-May, up by EUR 319.6 mn m-o-m or by as much as EUR 772.4 mn y-o-y. This level of reserves covered 182% 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) came at EUR 9,709 mn, which is by EUR 347.0 mn more than at the end of the previous month.
Almost all categories worked towards boosting gross FX reserves. Net inflows to FX reserves from NBS activities in the IFEM (EUR 139.5 mn), efficient FX reserve management and other sources (EUR 184.5 mn in total) along with the positive net market effect (EUR 41.9 mn) exceeded by far the net outflow on account of regular bank activities with regard to FX reserve requirements (EUR 46.3 mn) as the only category that worked towards reducing reserves.
Trading volumes in the IFEM amounted to EUR 438.7 mn in May, down by EUR 10.1 mn relative to April. In the first five months of the year, IFEM trading volumes totalled EUR 2,290.4 mn.
At the month-level, the dinar stayed broadly unchanged against the euro. Since early this year, it has nominally appreciated against the euro by 0.2%. Against the background of somewhat more pronounced appreciation pressures in late May, the NBS intervened in the IFEM by purchasing EUR 110 mn, in order to ease excessive short-term volatility of the exchange rate.
In May, for the sixth time in 2019, the NBS held an additional swap auction, where in the first leg, it swap bought EUR 87 mn from banks on a two-week term, supplying them with dinar liquidity worth RSD 10.3 bn. The additional auction was held to ensure relative stability of short-term market interest rates at the start of the new required reserve maintenance period.