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Record-breaking gross foreign exchange reserves: Overview and market impact in April

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At the close of April this year, the National Bank of Serbia (NBS) reported that the gross foreign exchange reserves had reached 25,129.2 million euros, marking the highest level ever recorded at the end of a month. This announcement came today from the NBS. Compared to the end of March, the gross foreign exchange reserves saw an increase of 187.1 million euros.

The NBS highlighted that these reserves offered substantial coverage, with the money supply M1 covered at 169.8% and goods and services imports secured for 6.7 months. This level of coverage significantly surpassed the standard deemed necessary for adequate reserve coverage. Additionally, the net foreign exchange reserves amounted to 20,921.7 million euros, showing an increase of 242.6 million euros compared to March’s figures.

The largest inflows into the foreign exchange reserves during April were attributed to NBS interventions, totaling 305.0 million euros. Moreover, foreign exchange purchases amounted to 195 million euros. These purchases were settled in early April, along with a portion of net foreign exchange purchases during the month totaling 110 million euros. Further, foreign exchange purchases made during the final two working days of April, amounting to 100 million euros, will contribute to the increase in reserves expected in May.

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In addition to interventions and purchases, inflows into the reserves were also generated from foreign exchange reserve management, donations, and other sources, totaling 104.5 million euros. The NBS noted that these inflows exceeded the outflows from foreign exchange reserves, which included net state disbursements for foreign exchange loans, securities, and other obligations, totaling 307.5 million euros, as well as other expenditures amounting to 59.3 million euros.

Market dynamics also played a role in boosting the reserves, with a positive net effect of market factors amounting to 144.4 million euros. This was primarily driven by a 4.2% increase in the price of gold and a 0.7% strengthening of the dollar against the euro on the international market.

In terms of trading activity, the volume of foreign exchange trading in the interbank foreign exchange market in April totaled 837.1 million euros, up by 63.5 million euros from the previous month. Year-to-date, total trading in the interbank market reached 2,839 million euros.

The value of the dinar against the euro remained almost unchanged in April, while since the beginning of the year, the dinar has nominally strengthened against the euro by 0.1%. In April, the NBS net purchased 210 million euros in the interbank foreign exchange market. Since the beginning of the year, the NBS has net purchased 530 million euros to maintain relative stability in the dinar-euro exchange rate.

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