Central Bank of Armenia Moves to Shore Up Currency

A schoolboy walks past a currency exchange sign in Yerevan (Source: RFE/RL)
A schoolboy walks past a currency exchange sign in Yerevan (Source: RFE/RL)

A schoolboy walks past a currency exchange sign in Yerevan (Source: RFE/RL)

YEREVAN (RFE/RL)—The Central Bank of Armenia (CBA) has stepped up its hard currency interventions in an apparent effort to prevent a renewed depreciation of the national currency as a result of downward pressures from Russia.

The CBA injected $50 million in the local currency market on Wednesday, a sharp increase from the usual volume of its interventions, which rarely exceed several million dollars a day.

The move followed a roughly 1.4 percent weakening of the dram against the US dollar registered since last weekend. The dollar-dram exchange rate had barely changed since the beginning of this year.

The CBA did not give any reasons for its massive dollar injection by Armenian market standards. Analysts believe that the move was designed to shore up the dram, amid a further depreciation of the Russian ruble resulting from a continuing decline in international oil prices.

The ruble has fallen by around 13 percent against the dollar since the beginning of July. The Russian currency has lost roughly half of its value against the dollar and the euro over the past year.

The ruble’s depreciation has significantly cut the dollar-denominated value of vital remittances sent home by hundreds of thousands of Armenians working in Russia. Consequently, the dram came under strong downward pressures late last year, weakening against the dollar by around 17 percent in October-December.

Exchange rate fluctuations in Armenia were particularly sharp in mid-December, causing panic-buying of dollars and briefly disrupting retail trade. The CBA managed to stabilize the currency market by sharply raising interest rates, tightening minimum reserve requirements for Armenian commercial banks and cracking down on what it called speculative currency trading. The dram depreciated by only 1.6 percent from January through the end of last week.

Bagrat Asatrian, a former CBA manager critical of Armenian authorities, criticized the latest Central Bank intervention on Thursday, saying that the dram’s exchange rate is “artificial” and that authorities want to keep it unchanged for political reasons. In particular, he pointed to a constitutional referendum which President Serzh Sarkisian plans to hold in November.

“Over the past year, the most stable currency [in the non-Baltic former Soviet Union] has been the Armenian dram,” Asatrian told RFE/RL’s Armenian service (Azatutyun.am). “This should not have been the case because the Armenian economy is definitely not the most stable among these countries.”

Asatrian also claimed that the authorities risk further depleting Armenia’s modest foreign exchange reserves. “If this is a continuous policy, if the Central Bank wants to set a particular exchange rate, then that runs counter to both the bank’s obligations and the interests of our economy,” he said.


Discussion Policy

Comments are welcomed and encouraged. Though you are fully responsible for the content you post, comments that include profanity, personal attacks or other inappropriate material will not be permitted. Asbarez reserves the right to block users who violate any of our posting standards and policies.

One Comment;

  1. Mkhitar Yepremyan said:

    Hayer Khelki Yekkek!
    Why our Talanchi Oligarkhs who have billions and billions of dollars and our good old body-bodyTalanchi gang leader Serzh Sarkissian and his body-body talanchi brother who have looted our beloved nation’s wealth and stacked those in foreign lands deposit their stolen money in Armenia’s banks and revive the economy and stabilize the state of our currency.
    Our smart Spyurki Nakhakhar# then does not need to ask our diasporan people numbering in one thousand individuals to deposit $ 1000.00 each in Armenia’s banking system to revive Armenia’s economy. Although, diasporan Armenians do to their best of means and ability share their part in doing so.
    The fish is rotten at the head as the saying goes around and as longest these TALANCHIS are around, the smell is not going away! And, if there are those who are content with smelling this rotten fish for longer and longer times to come, then good luck to you and keep on smelling the rotten fish until all of us become rotten at the head as well! Vay Mez Korank Dzer Khelki Patcharov!