NBS: Trading volumes in the interbank foreign exchange market in seven months EUR 4.1 billion

Total trading volumes in the interbank foreign exchange market (IFEM), excluding NBS interventions, amounted to EUR 4.1 billion in the first seven months of 2016, announced the NBS on Thursday, August 18. In the first 16 days of August, trading volumes were EUR 171.9 million.

Average monthly trading volumes in the first seven months amounted to EUR 589.5 million and were at the levels of 2009 and 2014 average.

– Somewhat (though not significantly) higher averages were recorded in 2013 and 2015. The 2010–2012 period stands out as monthly average trading volumes ranged from EUR 897 million to EUR 1,628.1 million – the NBS reported.

The NBS notes that trading volumes in the IFEM per se are not indicative of market development or possibly “suffocated” trading through central bank interventions. They explain that during 2010, 2011 and 2012, “psychological factors” in the IFEM, i.e. speculative transactions and the resulting panic in the FX market significantly increased overall trading volumes.

– Through timely and amount-wise well-measured interventions, the NBS, from 2013 onward, has managed to bring about greater stability in the FX market, which restored confidence of both the citizens and foreign investors in the dinar and created room for further macroeconomic advancement – the central bank pointed out.

As the report says, the NBS has managed, through such interventions, to “remedy psychological factors that used to create pressures in the FX market without a real reason (chiefly a higher exchange rate) and send a clear signal to all market participants that that the NBS does not target any level of the exchange rate, but that it will not allow excessive shot-term volatility of the exchange rate, i.e. that it will prevent any threats to financial stability”.

– In days when it was estimated that IFEM trading volumes were low, NBS interventions did not “suffocate” the market, but rather encouraged an increase in IFEM trading – the NBS emphasized and added that the reduction in the current account deficit was another factor that had contributed to lower IFEM trading volumes from 2013 onward.

Narodna banka Srbije Beograd

trading volumes in the interbank foreign exchange market