AMD/USD exchange rate to range within 300 amd/$1 by end of 2007

YEREVAN, November 27. /ARKA/. No further USD devaluation should be expected in Armenia before the end of 2007, and the USD/AMD exchange rate will range within 300 AMD/$1, said a number of dealers of Armenia’s commercial banks, commenting on the recently developed situation on Armeni9a’s currency market.

It is noteworthy that the USD has overcome the next psychological barrier on Armenia’s financial market. Since November 23, Yerevan’s exchange offices and banks have exchanged cash US dollars at an exchange rate of lower than 300 AMD/$1. Some exchange offices even reduced the AMD/USD exchange rate to 270-280 AMD/$1. The purchase exchange rate was 290-303 AMD/$1. As a result, on November 26, the USD average market exchange rate published by the Central Bank of Armenia (CBA) was 305.46 AMD/$1 – a 7.43% fall.
 
Of interest is the fact of a wider margin on the USD purchase and sale. On the days of “ordinary AMD revaluation” it was 3-5 AMD, whereas it has widened over the last two days, which is evidence of certain exchange rate fluctuations, and therefore, the wish of currency dealers and exchange offices to secure themselves against risks. As regards the margin on the Euro exchange rates, it reached a critical point – 20 AMD to 20 AMD, which is even stranger.

Dealers of Armenia’s commercial banks explain the USD serious revaluation against the AMD is, first of all, the result of the panic among market members. From last Thursday, a number of banks and exchange offices had queues of those wishing to exchange US dollars for Armenian drams. Besides, panic-stricken citizens who have only small USD savings made for exchange offices to convert them into Armenian drams.
In general, large-scale inflow of capital to the country can still be observed, not only in the form of transfers, cash, but also in the form of investments and international credits.
 
Some dealers point out that written orders on bank accounts decreased to an extent with simultaneous large-scale inflow of cash to the country. Under the circumstances, the cash and noncash exchange rates showed a considerable difference. As a result, members of Armenia’s currency market (banks, dealers and exchange offices) had a unique chance to take advantage of the situation and receive considerable profits. As a result, speculator intensified their activities.

However, the bankers point out some stabilization of the market situation. Also, on November 26 the Armenian Stock Exchange (ARMEX) recorded a considerable volume of transactions with US dollars, $25.7mln (7.8bln AMD). Last Friday, ARMEX recorded a considerable volume of transactions as well - $20.2mln. All this curbed a more serious fall in the USD exchange rate.

In its turn, more active speculation on the currency market made the CBA establish control over dubious transactions at all banks, which facilitated the exchange rate stabilization as well.

Bank dealers believe that the USD devaluation will be stopped before the end of the year and range within 300 AMD/$1. According to bankers, the CBA will try to prevent further USD devaluation on the New Year eve.

Some dealers hold the opinion that further USD devaluation, but not at the lately recorded rates, can be expected. Even if the USD exchange rate rises, it will only be temporary reversion. As a result, the USD/AMD exchange rate will be 280-290 AMD/$1 before the end of 2007.

Since early November, a 6.04% fall in the USD exchange rate has been recorded in Armenia – from 325.09/$1 on October 31 to 305.46 AMD/$1 on November 26, 2007. Since the beginning of 2007, 16% USD devaluation has been recorded in Armenia, with 18% USD devaluation recorded compared to the corresponding period last year (372.38 AMD/$1 on November 26, 2006).

From 2003 to 2006, 28.12% USD devaluation was recorded in Armenia. In 2003, the USD average exchange rate was 578.77 AMD/$1, in 2004 533.45 AMD/$1, in 2005 457.69/$1, in 2006 416.04 AMD/$1. This year, 19.26% USD devaluation against the AMD has been recorded (official exchange rate) – from 450.19 AMD/$1 early in 2006 to 363.50 AMD/$1 late this year.–0--