Central Bank of Armenia continues to smoothly curb exchange rate growth by weekly interventions

ArmInfo. The Central Bank of Armenia smoothly curbs the exchange rate growth due to weekly interventions. This week as well as last week the Central Bank made the biggest intervention on Friday (26.5 mln USD) on the forex inter-bank. As a result, after devaluating against USD from 482 to an average of 489 AMD in January the Armenian dram continued to weaken in February and was fixed at 494 at the moment of CB intervention on February 5 (versus 477 AMD/$1 on this day a year before). In independent experts opinion amid the aggravating financial and economic crisis in Russia and the dropping prices of oil and metallurgy, which is one of the key export items of Armenia, by late 2016 the AMD/USD exchange rate may rise to 540-550 AMD/$1. 

According to the CB press office, NASDAQ OMX Armenia was not active over this week eigher, the interbank forex market operated in the middle of the week (in Wednesday-2 mln USD and in Thursday-600 thousand USD), with the largest operations fixed on February 5 (the CB intervention made on Friday-$26.5 mln). The total amount of the transactions for the week was $29.1 mln and the average exchange rate was fixed at 492.07 AMD/1USD. To note, the first large interventions of the Central Bank in 2016 were on January 15 ($32.4 mln), January 29 ($23.8 mln) and February 5 (26.5 mln USD), while in 2015 the large interventions were on August 28 - $95 mln, September 19 - $22.2 mln, November 13 - $19.6 mln and smaller ones on December 11 - more than $6 million and on October 2 - $6 mln.

The source says that on February 1-5, on the intrabank currency market (transactions with customers) the banks bought $57.7 mln (24% decline versus the previous week) at the average exchange rate of 489.67 AMD/$1, and sold $75.98 mln (16.5% drop versus the previous week) at the average exchange rate of 492.45 AMD/$1. In the meantime, the banks bought 8.4 mln EUR (weekly growth 55%) at the average exchange rate of 538.20 AMD/1EUR, and sold 11.3 mln EUR (weekly growth by 22.8%) at the exchange rate of 540.23 AMD/1EUR. The banks also bought 1.02 bln RUR at the average exchange rate of 6.33AMD/1RUR and sold 663.8 mln RUR (26% weekly growth) at the exchange rate of 6.42 AMD/1RUR.

During the previous week (January 25-January 29) the Armenian banks provided AMD loans worth 34 bln AMD and USD loans worth 42 mln USD.  As compared with the previous week (January 18-24), AMD loans decreased by 9.8% and the ones in terms of USD rose by 13.5%.

To recall, during 12 months of 2015 on the retail foreign exchange market of Armenia AMD weakened against USD from 477 to 482 AMD/$1m in average and strengthened against EUR from 571.5 to 529 AMD/1EUR and against Russian ruble from 8.2 to 6.9 AMD/1 RUR. Between December 14 and 28 Central Bank made almost daily interventions. AMD depreciated amid decline of foreign trade turnover (more than 20%), while import dropped more significantly (26.5%) than export (3.9%) as well as decline of transfers inflow to Armenia more than by 30%, and this happened in conditions of low buying capacity of the population and low economic activity in the country. Since 2016, despite the weekly interventions of the Central Bank, AMD started depreciating again on the retail foreign exchange market of Armenia and stood at 494 AMD/1USD by February 5. At the same time AMD depreciated against EUR to 552 AMD/1EUR and appreciated against RUR to 6.6 AMD/1RUR.