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Oct 30 2010
AMD exchange rate: Guinness Book of Records too high a level for it?
October 30, 2010 | 01:27
By Samvel Avagyan
This week, the AMD exchange rate has sprung a surprise by setting new
records. On October 29, the Armenian dram exceeded the exchange rate
of 358 AMD/U.S. $1. The average market exchange of the day was 357.61
AMD/U.S. $1. Since the market exchange rate was higher at the close,
hardly any shocks should be expected in the financial market during
the weekend. In any case, this has been the highest exchange rate over
the last 18 months.
Obviously, the Central Bank of Armenia (CBA) is not making any serious
steps to stabilize the national currency. The CBA makes weekly
interventions of several million AMD, which hardly play a key role in
the market. However, let us remember that the CBA has traditionally
viewed November and December as a period for replenishing its currency
reserves by purchasing U.S. dollars from the currency market. Many
Armenian businessmen normally prepare for the New Year from November
by flooding the market with U.S. dollars. Citizens, in turn, spend
their saving in December.
Official data show Armenia's foreign exchange market has been rather
active this week. Banks purchased about U.S. 77 million and sold U.S.
$85 million by means of exchange offices. For Armenia, this is
evidence of a lively market. Although the demand for U.S. dollars
exceeds that for the Armenian dram in the financial market, it is the
Armenian dram that is revaluating. The banks' U.S. dollar surplus may
account for this - they can meet the growing demand for U.S. dollars
without any problems. However, if the demand remains so high so some
time more, banks will have to devalue the Armenian dram.
All the banks are expecting AMD devaluation. If not so, what accounts
for the fact that, amid AMD revaluation, USD credits are available at
an annual interest rate of 10%, the annual interest rate on AMD
credits being 14%? On the other hand, if the AMD `falls short of
expectations', the banks that issue USD credits will sustain serious
losses, as USD credits constitute over 50% of all credits.
From: A. Papazian
Oct 30 2010
AMD exchange rate: Guinness Book of Records too high a level for it?
October 30, 2010 | 01:27
By Samvel Avagyan
This week, the AMD exchange rate has sprung a surprise by setting new
records. On October 29, the Armenian dram exceeded the exchange rate
of 358 AMD/U.S. $1. The average market exchange of the day was 357.61
AMD/U.S. $1. Since the market exchange rate was higher at the close,
hardly any shocks should be expected in the financial market during
the weekend. In any case, this has been the highest exchange rate over
the last 18 months.
Obviously, the Central Bank of Armenia (CBA) is not making any serious
steps to stabilize the national currency. The CBA makes weekly
interventions of several million AMD, which hardly play a key role in
the market. However, let us remember that the CBA has traditionally
viewed November and December as a period for replenishing its currency
reserves by purchasing U.S. dollars from the currency market. Many
Armenian businessmen normally prepare for the New Year from November
by flooding the market with U.S. dollars. Citizens, in turn, spend
their saving in December.
Official data show Armenia's foreign exchange market has been rather
active this week. Banks purchased about U.S. 77 million and sold U.S.
$85 million by means of exchange offices. For Armenia, this is
evidence of a lively market. Although the demand for U.S. dollars
exceeds that for the Armenian dram in the financial market, it is the
Armenian dram that is revaluating. The banks' U.S. dollar surplus may
account for this - they can meet the growing demand for U.S. dollars
without any problems. However, if the demand remains so high so some
time more, banks will have to devalue the Armenian dram.
All the banks are expecting AMD devaluation. If not so, what accounts
for the fact that, amid AMD revaluation, USD credits are available at
an annual interest rate of 10%, the annual interest rate on AMD
credits being 14%? On the other hand, if the AMD `falls short of
expectations', the banks that issue USD credits will sustain serious
losses, as USD credits constitute over 50% of all credits.
From: A. Papazian