Thursday, April 8 2021 12:42
Karine Melikyan

The Central Bank of Armenia announces its intention to intervene in  the foreign exchange market for the second time in 2021

The Central Bank of Armenia announces its intention to intervene in  the foreign exchange market for the second time in 2021

ArmInfo. For the second time this year, the Central Bank of Armenia announces its intention to intervene in the foreign exchange market to ensure the normal  operation of the financial sector. This is stated in the statement of  the Central Bank of the Republic of Armenia issued on April 8.

The report also notes that the Central Bank of Armenia continues to  monitor the financial markets and, if necessary, will use all the  tools available in its arsenal, ensuring price stability and  financial stability.  Note that the Central Bank's previous  announcements of its intention to enter the foreign exchange market  with interventions were made in 2020 on November 24 and December 15,  and in 2021 on January 13.  Prior to this, a noticeable devaluation  of the dram in the retail foreign exchange market of Armenia began to  be observed from the second decade of October 2020, with the approach  of November 18 close to the mark of 500 DR/$1 on average, and the  next day the dram exchange rate against the dollar already exceeded  501 DR/$1, and by November 23 reached 507 DR / $1 on average,  continuing to weaken more pronounced. So, on November 24, the dram  rate against the US dollar jumped to 516 DR/$1 on average, against  the euro-to 612 DR/1 euro, and against the ruble rose moderately to  6.9 DR/1 ruble.

However, after the Central Bank announced its intention to intervene  in the foreign exchange market on November 24, a slow strengthening  of the dram has already been observed since November 26, and by  December 1, the dram strengthened against the dollar to 507 DR/$1 on  average, against the euro-to 607 DR/1 euro, and against the ruble -  to 6.7 DR/1 ruble, continuing this attitude on December 2 - to 506.5  DR/$1 and 605 DR/1 euro, respectively, and "frozen" against the ruble  at 6.7 DR / 1 ruble. But since December 3, the dram has again  devalued to 511.5 DR/$1, 619 DR/1 euro and 6.9 DR/1 ruble, with the  continuation of this trend in the following days, and by December 11,  the dram weakened against the dollar to 521.5 DR/$1, against the euro  - to 634 DR/1 euro, against the ruble - to 7.2 DR / 1 ruble. And on  December 15, the dram devalued against the dollar and the euro to 528  DR/$1 and 640 DR/1 euro, while maintaining its position against the  ruble. After the repeated announcement of interventions and high  activity on the foreign exchange interbank market during the last  decade of December 2020, the dram was set to strengthen, revaluing by  December 29 against the US dollar to 522.5 DR/$1 on average, against  the euro-to 639 DR/1 euro, against the ruble - to 7.1 DR / 1 ruble.   As a comparison, we note that at the end of 2019, the dram exchange  rate against the US dollar was 479.3 DR/$1 on average, against the  euro-531 DR/1 euro, against the ruble-7.7 DR/1 ruble.

After the Central Bank announced its intention to intervene on  January 13, 2021, by January 29, the dram against the US dollar  strengthened to 518.5 DR/$1 on average, against the euro-to 627  DR/1evro, against the ruble - up to 6.9 dr/1 ruble. But the dram's  renewed devaluation in February weakened it to 531.8 DR/$1 on average  against the US dollar by the end of March. The devaluation mood of  the dram in the retail foreign exchange market continued in the  following month, which weakened it by April 8 against the US dollar  to 540.5 DR/$1 on average, against the euro-to 640.5 DR/1 euro,  against the ruble - to 7.1 DR/1 ruble.

According to the Central Bank of the Republic of Armenia, in January  2021, the Central Bank of the Republic of Armenia intervened in the  foreign exchange market for a total of $46.8 million-completely on  sale. For the whole of 2020, the Central Bank intervened for a total  of $328.750 million, of which $90.9 million was bought  (January-February and April) and $237.850 million was sold  (March-April, November-December). And if in January-February  interventions in the foreign exchange market were exclusively for  rbuying, and in March-only for selling, then in April the Central  Bank made operations for both buying and selling (sales volume almost  2 times exceeded the volume of buying - $57 million against $33.1  million), and in November-December the Central Bank made operations  only for selling in the amount of $110.850 million. In May-October,  the Central Bank did not intervene. 

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