Tag Archives: currency

Currency market: Lari falls but finishes 2017 up

JAN. 5 (The Conway Bulletin) — The Georgian lari yo-yoing showed no sign of stopping as it came off recent highs to fall 1.2% in the period from Dec. 22. On Dec. 22, the Georgian lari had been valued at 2.534/$1 compared to its current value of 2.589/1. It finished the year at 6.6% higher than its 2017 starting value.

The other big mover over the Christmas period was the Kyrgyz som. It rose 1.2% to 68.93/$1 and finished the year nearly 0.5% stronger against the US dollar.

Indeed only two currencies out of the eight in the Central Asia and the South Caucasus region were weaker on New Years eve 2017 then they were on the first trading day of the year.

The Uzbek authorities effectively devalued their soum currency in September when they released it from its various US dollar pegs. It immediately lost half its value to trade at around 8,100/$1 and has stayed there ever since.

The other losing currency of 2017 was the Tajik somoni. Pushed down by bad fundamentals and a failing banking system it finished the year 12% lower at 8.8277/$1.

ENDS
— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Veon says devalued Uzbek soum has cost it “hundreds of millions of doillars”

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TASHKENT/SEPT. 21 (The Bulletin) — Veon, the New York-listed Amsterdam-headquartered telecoms company formerly called Vimpelcom, said that that the liberalisation and devaluation of the Uzbek soum had cost it hundreds of millions of dollars.

Earlier this month, the Uzbek government scrapped a US dollar peg for the Uzbek soum, allowing it to lose half its value. The move was generally applauded as necessary to modernise Uzbekistan’s economy and for giving foreign investors clarity but businesses already entrenched in Uzbekistan said there would be a cost.

Veon, which operates the Unitel subsidiary in Uzbekistan under the Beeline brand, said there were advantages in the long-run but that, in the short term, profits were lower.

“Under these liberalized exchange rules, Veon may in the longer term be able to more effectively repatriate cash from Uzbekistan,” it said in a statement.

“[But] as a result [of the devaluation], Veon expects annualised decreases in revenues of $300-350m and in underlying EBITDA of $175-225m.” These comments are important as they come from a company already doing business in Uzbekistan.

Veon has previously been fined for paying a bribe to a company ultimately owned by the daughter of Uzbek president Islam Karimov for market access to Uzbekistan in 2007/8.

Sweden’s Telia and Norway’s Telenor have also been fined for paying bribes in Uzbekistan.

ENDS

— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.

— Copyright the Central Asia & South Caucasus Bulletin 2017

Uzbekistan lifts decades-long currency controls

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TASHKENT, SEPT. 5 2017 (The Conway Bulletin) — Uzbekistan released its soum currency from decade-long controls that have artificially bolstered its strength and allowed a Black Market to flourish.
Officially, the soum dropped by nearly 50% to trade at around 8,000/$1, roughly the Black Market level prior to the announcement that currency controls were to be lifted.
President Shavkat Mirziyoyev, in power since September last year, wants to increase civil liberties and he saw the dual currency rates as holding back investment. The currency controls effectively made investing in Uzbekistan twice as expensive for foreign companies as it should have been.
A Conway Bulletin correspondent in Tashkent said that hundreds of ordinary Uzbeks queued to exchange Uzbek soum into US dollars at banks and official exchange points rather than through Black Market dealers in the city’s bazaars.
While most people were happy that the currency controls had been lifted, others were more cautious. One of the main gripes was that the government would only allow the exchanges to go through on special bank cards, rather than through cash.
“Currency can only be bought on a conversion card, not cash? I mean you sell your dollars to the bank in cash, but you can buy it only on the card?” one man queuing at a bank said.
“The question is – what’s the use of it? After all, with the same success, I can buy currency on the Black Market and go abroad and spend it there with the same success. When will they start selling foreign currency in cash?”
Others were more upbeat.
“It is clear that the first stage of the reform will begin to work now. And I hope after some time we will be allowed to buy dollars in cash,” another man said.
Nearby, though, the impact of scrapping the currency controls was being felt in other ways. In an area of Tashkent’s biggest bazaar usually crowded with money changers, only policemen stood idly. The currency Black Market, so long a feature of Uzbek life, has been, at least temporarily, put out of business. Some people, though, ruefully said that it could rebound.
“The Black Market will eventually come back if cash cannot be bought in banks,” one woman said.
ENDS

(News report from Issue No. 342, published on Sept. 7 2017

CURRENCY MARKETS: Uzbek soum collapses after pegs are cut

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SEPT. 7 2017 (The Conway Bulletin) — It’s all eyes on the Uzbek soum after the Central Bank said last week that it would converge the dual currency exchange rate system that has been operating since the collapse of the Soviet Union in 1991. Under that system, the Black Market rate of the soum was roughly half the official rate.

And so it proved. As soon as controls over the official rate were scrapped, it fell by 48% to 8,100/$1. The unofficial rate, as measured by the uzdollar.com, remained pretty much steady at around 7,700/$1.

In reality, the economic shock of ditching support for an official exchange rate will be limited. Currency controls previously meant that the Black Market rate had been widely used. Uzbeks were used to a rate of around 7,700/$1 to 8,800/1.

ENDS

(News report from Issue No. 342, published on Sept. 7 2017)

Uzbek soum fluctuates heavily

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AUG. 19 2017 (The Bulletin) — Uzbekistan soum currency has been volatile since last week when Reuters reported that President Shavkat Mirziyoyev and the Central Bank wanted to reform exchange rates. Uzbekistan currently has two operational exchange rates — an official one and an unofficial one. The Black Market rate rose to around 7,300/$1 by Aug. 14, from around 8,400/$1 at the start of the month. It had lost ground by the end of the week, though, and finished at around 8,100/$1.

ENDS

(News report from Issue No. 340, published on Aug. 20 2017)

Uzbek CB introduces new bank note

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AUG. 14 2017 (The Bulletin) — Reflecting sharp inflationary pressures, the Uzbek Central Bank said that it was going to introduce a 50,000 soum banknote. In June, in a rare statement, the Central Bank said that rising inflation had forced it to increase its key interest rate to 14% from 9%. Earlier this year it introduced a 10,000 soum note. The 50,000 soum note is equivalent to $12 on the official exchange market and around $6 on the unofficial market.

ENDS

(News report from Issue No. 340, published on Aug. 20 2017)

Kazakh CB blames rouble for tenge fall

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AUG. 2 2017 (The Bulletin) — Kazakhstan’s Central Bank said that speculation over the Russian rouble had forced a depreciation of the tenge. By the end of trading on Aug. 4, the tenge was trading at 332.91/$1, down from around 310/$1 at the end of May. Kazakhs have openly started to worry about a repeat of the devaluation of 2015 that wiped 50% off the value of the currency.

ENDS

(News report from Issue No. 336, published on Aug. 5 2017)

Currencies: Uzbekistan’s soum

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JULY 27 2017 (The Bulletin) — So, it looks like we already have the big currency story of the year for the region. At least, that is, unless something goes terribly wrong with some of the more wobbly currencies out there – mentioning no names – Azerbaijan, Turkmenistan and even Kazakhstan.

The IMF returned from a mission to Tashkent saying that the government there was fully intending to relax currency exchange regulations that have strangled foreign investment. The official rate of the Uzbek soum is now just over 4,000/$1. The unofficial rate is more than double. How they merge is going to be the story to watch.

In the meantime, if anybody has missed it, it is clear that the Uzbek Central Bank has been managing a steady devaluation of its currency. The chart below shows the steps it has been making to devalue it – by more than 25% since the end of January.

On the equities front, KAZ Minerals continues to outperform, mainly because of another surge in copper prices.

ENDS

(News report from Issue No. 337, published on July 27 2017)

Uzbekistan promises to reform its currency exchange

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TASHKENT, JULY 24 2017 (The Bulletin) — Uzbekistan plans to power ahead with reform of its currency exchange, the IMF said after a mission to Tashkent.

The Uzbek Central Bank has steadily cut the value of its soum currency, allowing it to devalue by around 25% this year, but there are still restrictions on trading it. Tearing up these restrictions would underscore the credentials of Shavkat Mirziyoyev, president since September last year, as a reforming leader.

In a statement, the IMF said: “The mission especially welcomed the authorities’ plan to frontload reforms of the foreign exchange system. Unifying exchange rates and allowing a market-based allocation of foreign exchange resources would allow the Central Bank of Uzbekistan to pivot to a stability-oriented monetary policy capable of effectively controlling inflation.”

The reference to inflation is important as the Uzbek Central Bank said earlier this year that it was having to raise its key interest rate to combat rising prices. Like the rest of the region, a collapse in oil prices and a recession in Russia have hit the economy of Uzbekistan.

Operating in Uzbekistan has always been problematic for foreign investors. There are two different exchange rates in the country. The official one set by the Central Bank, and the unofficial Black Market rate. A Bulletin correspondent said the Black Market rate for the Uzbek soum was 8,450/$1, compared to just over 4,000/$1 on the official market.

The IMF also said restructuring state-owned companies and banks and improving economic data were vital.

“The authorities’ decision to adopt a new CPI to measure inflation, starting in 2018, should already help improve the quality of a key statistical indicator,” the IMF said.

ENDS

(News report from Issue No. 337, published on July 27 2017)

Currencies: Kazakhstan’s tenge

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JULY 16 2017 (The Bulletin) — The Kazakh tenge has now fallen to its lowest level since January, giving up most gains it had made this year.

By July 14 it was trading at $327.91/$1, down 2.3% since July 3. At its year peak on May 25, the tenge had traded at 310.65/$1. This means that it has fallen by 5.5% in around seven weeks.

A fluctuating oil price is likely to have had little impact on the value of the tenge. It has been hovering between $50 and $45 per barrel for some time. Instead, commentators have pointed to weak Kazakh fundamentals which suggest that the economy is still in poor shape.

Most worryingly amongst this economic data is the bad debt ratio that banks have built up. It just seems to be getting bigger and the government is preparing a bailout.

ENDS

(News report from Issue No. 336, published on July 16 2017)