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UPDATE 1-Serbia's central bank to buy euros to stem dinar gains - cbank governor

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BELGRADE, Feb 14 (Reuters) - Serbia's central bank will likely buy an unspecified quantity of euros on the local interbank market on Wednesday to stem dinar gains prompted by auctions of treasury bonds, governor Jorgovanka Tabakovic said.

In addition to two sales of treasury bonds held on Feb. 6 and Feb. 13, Serbia's Debt Agency scheduled three more auctions this month for Feb. 20, 27 and 28. In the first quarter the debt agency plans to sell a total of 129.75 billion dinars.

"We will likely have to intervene today on the purchase side so the dinar will not strengthen as there are pressures because of auctions this month," Tabakovic said at a presentation of bank's February inflation report.

On Wednesday, the dinar traded at the rate of between 118.03 to 118.32, largely unchanged from the day before. It has gained 0.3 percent since the beginning of the year.

Tabakovic told journalists that the strengthening of the dinar was due to higher demand by foreign portfolio investors who are buying dinar denominated debt.

She said low inflation could give room for the central bank to cut the benchmark rate, but its future policy would depend on external influences such as U.S. Federal Reserve and European Central Bank policies as well as oil prices.

Last week the bank kept its benchmark rate at 3.5 percent on citing Thursday, citing uncertainties in global markets, among other things. Another rate rise by the Federal Reserve in March, and a potential further reduction of the European Central Bank quantitative easing programme, could curb investors appetite for emerging markets including Serbia.

Belgrade's central bank projects inflation to remain within its target range of between 1.5 and 4.5 percent over the next two years.


(Reporting by Ivana Sekularac; writing by Aleksandar Vasovic; Editing by Mark Heinrich)

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