Oct. 26 (Bloomberg) -- Serbia’s dinar, the third-best performer among major eastern Europe currencies this month, may weaken as much as 5 percent as a deepening debt crisis may force banks to “raise capital ratios,” Nordea Bank AB said.
“It all depends on market sentiment, but a move back towards 105 is reasonable if markets are worried,” Elisabeth Andreew, a strategist at Nordea in Copenhagen, said in a phone interview today.
The dinar weakened for a fourth day, following declines in currencies across eastern Europe as concern efforts to remedy the credit crisis were stalling. Serbia’s currency slipped 0.2 percent to 100.10 per euro at 6:10 p.m., trimming this month’s gain to 1.4 percent.
The dinar has outperformed currencies in Poland, Hungary, Bulgaria and Romania this month after the International Monetary Fund’s approval a precautionary loan agreement worth about 1 billion euros ($1.4 billion) helped shore up confidence in Serbia. A deepening credit crisis may force foreign banks, which account for more than 70 percent of the country’s banking industry, to raise capital levels, Nordea said in a report today.
“There are clearly some positive developments that are helping to stabilize the Serbian dinar,” Andreew wrote in the report. Still, markets may return to focus on the banking sector and “in this environment, we believe the dinar will weaken,” she said.
--Editors: Stephen Kirkland, Linda Shen
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