Saturday, March 5 2016 09:34
Svetlana Hovsepyan

Small interventions by Central Bank of Armenia have short-term, stabilizing effect on exchange rate

Small interventions by Central Bank of Armenia have short-term,  stabilizing effect on exchange rate

ArmInfo. Small interventions by the Central Bank of Armenia have short-term stabilizing effect on the exchange rate. Thus, in the first half of the current week CBA made daily small interventions ($1-$3mln) on the forex market strengthening AMD from 492 to 489 AMD/$1in three days but since Thursday the interventions stopped and AMD again weakened to 492 AMD/$1. After devaluating against USD from 482 to an average of 489 AMD in January the Armenian dram continued to weaken in the following month up to 496AMD on February 12.  Afterwards a slow revaluation followed due to the CBA's intervention.  However as soon as the CBA stops interventions AMD devaluates immediately. Independent experts say the AMD/USD exchange rate may rise to 540-550 AMD/$1 by late 2016, amid the financial and economic crisis in Russia and the sliding prices of oil and crude metals, which is one of the key export items of Armenia.

 
The CBA press office has told ArmInfo that NASDAQ OMX Armenia, which was not active throughout February, did not show any signs of activity in the first week of March as well. At the same time the interbank forex market continues actively operating almost every week 
due to the CBA's interventions, ensuring the total amount of $8.2 mln transactions by the average exchange rate at 490.65 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), February 5 (26.5 mln USD) and February 12 ($16.2 mln), 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 - $6 million and on October 2 - $6 mln. 
 
The source says that on February 22- March 4, on the intrabank currency market (transactions with customers) the banks bought $78.6 mln (23% growth versus the previous week) at the average exchange rate of 490.18 AMD/$1, and sold $81.6 mln (61% growth versus the previous week) at the average exchange rate of 491.87 AMD/$1. In the meantime, the banks bought 5.5 mln EUR (weekly growth by 3.8%) at the average exchange rate of 532.29 AMD/1EUR, and sold 9.7 mln EUR (weekly drop by 48%) at the exchange rate of 536.59 AMD/1EUR. The banks also bought 888.7 mln RUR (30% weekly growth) at the average exchange rate of 6.54 AMD/1RUR and sold 487.9 mln RUR (35% weekly 
growth) at the exchange rate of 6.68 AMD/1RUR.
 
During the previous week (February 22-26), the Armenian banks provided AMD loans worth 46.3 bln AMD and USD loans worth 73.4 mln USD. As compared with the previous week (February 15-19), AMD loans increased by 2.7%, and the ones in terms of USD grew by 52%.
 
To recall, during the 12 months of 2015, on the retail foreign exchange market of Armenia AMD weakened against USD from 477 to 482 AMD/$1 on 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, the Central Bank made almost daily interventions.  AMD depreciated amid decline of foreign trade turnover (by 20.6%), while import dropped more significantly (by 26.5%) than export (by 3.9%) as well as the decline in transfer 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 early 2016, despite the weekly interventions of the Central Bank, AMD started depreciating again on the retail foreign exchange market of Armenia and stood at 492 AMD/1USD by March 4. At the same time AMD depreciated against EUR to 538 AMD/1EUR and appreciated insignificantly against RUR to 6.8 AMD/1RUR.
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