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news.am, Armenia
Sept 18 2010
Armenian commercial banks' forecasts prove false
September 18, 2010 | 15:26
The AMD exchange rate has been relatively stable, ranging within
360-370 AMD/U.S. $1, with the AMD revaluating rather than devaluating.
With the present trends considered, the AMD exchange rate is more
likely to appreciate than depreciate - that is it is more likely to be
lower than 360 AMD/U.S. $1 than higher than 370 AMD/U.S. $1. But only
a few months ago, most Armenian commercial banks involved in a
CBA-conducted survey forecast an exchange rate of higher than 370
AMD/U.S. $1 for this September.
The main reason for AMD revaluation is the USD surplus in the Armenian
banking system. According to our estimates, the Armenian banking
system has liquid funds totaling U.S. $400 at its disposal. The funds
are the result of the CBA interventions early last year, when it tried
to fix the AMD/USD exchange rate at 305 AMD/U.S. $1 to no avail.
The forecasts that the Armenian economy would `digest' the USD surplus
within few months proved false. Moreover, Armenia has received about
U.S. $2bn from abroad over the last 18 months, with part of the funds
can in any way be found in the Armenian financial system, increasing
the banks' liquid funds.
De-dollarization of deposits has lately been in progress in the
Armenian banking system - but the process is very slow. By July 2010,
foreign currency deposits had constituted 72.8% of all the bank
deposits against 73.3% lat December. If the de-dollarization gains in
scope, the AMD/USD exchange rate may even be 300 AMD/U.S. $1. We are
lucky that no serious de-dollarization process is taking place in
Armenia, as it is fraught with financial shocks.
From: A. Papazian
Sept 18 2010
Armenian commercial banks' forecasts prove false
September 18, 2010 | 15:26
The AMD exchange rate has been relatively stable, ranging within
360-370 AMD/U.S. $1, with the AMD revaluating rather than devaluating.
With the present trends considered, the AMD exchange rate is more
likely to appreciate than depreciate - that is it is more likely to be
lower than 360 AMD/U.S. $1 than higher than 370 AMD/U.S. $1. But only
a few months ago, most Armenian commercial banks involved in a
CBA-conducted survey forecast an exchange rate of higher than 370
AMD/U.S. $1 for this September.
The main reason for AMD revaluation is the USD surplus in the Armenian
banking system. According to our estimates, the Armenian banking
system has liquid funds totaling U.S. $400 at its disposal. The funds
are the result of the CBA interventions early last year, when it tried
to fix the AMD/USD exchange rate at 305 AMD/U.S. $1 to no avail.
The forecasts that the Armenian economy would `digest' the USD surplus
within few months proved false. Moreover, Armenia has received about
U.S. $2bn from abroad over the last 18 months, with part of the funds
can in any way be found in the Armenian financial system, increasing
the banks' liquid funds.
De-dollarization of deposits has lately been in progress in the
Armenian banking system - but the process is very slow. By July 2010,
foreign currency deposits had constituted 72.8% of all the bank
deposits against 73.3% lat December. If the de-dollarization gains in
scope, the AMD/USD exchange rate may even be 300 AMD/U.S. $1. We are
lucky that no serious de-dollarization process is taking place in
Armenia, as it is fraught with financial shocks.
From: A. Papazian