Saturday, March 12 2016 18:15
Svetlana Hovsepyan

Small interventions by Central Bank of Armenia keep preventing Armenian dram from depreciating

ArmInfo. Small interventions by the Central Bank of Armenia keep preventing the Armenian dram from depreciating. Thus, on March 9 the CBA's intervention amounted to almost 2 mln USD. At the end of the week the intervention totaled a little less than 1 mln USD, helping the AMD revaluate. As a result, over the current week AMD revaluated from 492 to 490 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 when the CBA stops its 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 and did not show any signs of activity in the first week of March, saw transactions worth a total of $100 thsd at the average exchange rate of 491.73 AMD/$1 on March 11. At the same time the interbank forex market continues actively operating almost every week due to the CBA's interventions, ensuring transactions worth a total of $3.4 mln at the average exchange rate at 491.73 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 March 9-12, on the intrabank currency market (transactions with customers) the banks bought $55.3 mln (29% decline versus the previous week) at the average exchange rate of 489.75 AMD/$1, and sold $53 mln (35% decline versus the previous week) at the average exchange rate of 491.42 AMD/$1. In the meantime, the banks bought 7.6 mln EUR (weekly growth by 38.2%) at the average exchange rate of 538.46 AMD/1EUR, and sold 11.3 mln EUR (weekly growth by 16%) at the exchange rate of 541.18 AMD/1EUR. The banks also bought 648.8 mln RUR (27% weekly decline) at the average exchange rate of 6.82 AMD/1RUR and sold 430.2 mln RUR (11% weekly decline) at the exchange rate of 6.96 AMD/1RUR.
 
During the previous week (February 29-March 4), the Armenian banks provided AMD loans worth 40.8 bln AMD and USD loans worth $37.7 mln. As compared with the previous week (February 22-26), AMD loans decreased by 12%, and the ones in terms of USD declined twofold. 
 
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 490 AMD/1USD by March 12. At the same time AMD depreciated against EUR to 562 AMD/1EUR and depreciated against RUR to 7.1 AMD/1RUR.
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