Tag Archives: currency

Markets: Turkish lira, Georgian lari

JAN. 13 2017 (The Conway Bulletin) — The Turkish lira has started the year looking like the sick man of Emerging Market currencies. It dropped to an all-time low of 3.89/$1 on Jan. 10 before pulling back slightly. It has lost 25% in the past year.

The triggers for this are global unease over the incoming US president, Donald Trump, a strong US dollar and Turkey’s own domestic issues hinged around the anti- Gulenist purges currently sweeping through business and government.

The lira is a fragile currency and for the currencies of Central Asia and the South Caucasus, this is a problem. After Russia, Turkey is one of the biggest drivers of regional growth. Istanbul is a natural hub for businesses in the region. Inherent weaknesses in the lira could pull down the rest of the region. And these currencies are already looking weak with the Georgian lari looking under particular pressure. Since December it has surfed around all- times lows of 2.66-2.77/$1.

ENDS

(News report from Issue No. 312, published on Jan. 13 2017)

Azerbaijan’s Central Bank to scrap exchange rate corridor

JAN. 12 2017 (The Conway Bulletin) — Azerbaijan’s Central Bank said that it will scrap a 4% exchange rate corridor to allow the manat to float freely. The exchange rate corridor had been designed to keep the manat stable but it has come under increased pressure because of the drop in oil prices and economic problems in Russia. The manat is now trading at around 1.82/$1. In June it traded at 1.49/$1.

ENDS

(News report from Issue No. 312, published on Jan. 13 2017)

Stock market: Georgian lari

DEC. 23 2016 (The Conway Bulletin) — It’s been a rollercoaster and with all good rollercoasters after a hair-raising ride you end up where you started.

This, of course, is Georgia’s lari currency. While it hasn’t quite ended 2016 where it started, and there are a few more days to go, it has been quite a ride. The lari opened 2016 at 2.41/$. On Dec. 22, the lari was trading at 2.75/$, a slight improvement from a year-low of 2.81 on Dec. 21 after the Central Bank intervened to give its currency a bit of strength.

It’s been on the slide since June when it peaked at 2.12/$. That’s a drop of 32.5% in six months. Like I said, it’s been quite a ride.

Essentially, the lari’s problems are Emerging Market currency problems.

They have been hit by a strengthened US dollar, security wobbles and by sustained low oil prices. Chuck in the poor performance of the Russian economy and stagnant local economic growth and its easy to see why the lari has been hammered. Worse-then-expected economic data and the Georgian Central Bank’s slashing of interest rates to try to boost growth have also weighed against the it.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)f

Georgia’s Central Bank props up lari

DEC. 20 2016 (The Conway Bulletin) — Georgia’s Central Bank sold $40m to try to stem a drop in the value of the lari, its first currency intervention since Oct. 12. In the past three months, the lari has lost around 19% of its value against the US dollar, worsening an already difficult economic outlook. In 2016, Georgia has sold $280m. The Central Bank blamed a strengthening US dollar for the lari slide.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Georgia Global Utilities issues 30m lari bond

TBILISI, DEC. 12 2016 (The Conway Bulletin) — Georgia Global Utilities (GGU), a subsidiary of London-listed BGEO Group, issued a 30m lari ($12m) bond, giving investors the chance to take a punt on the lari.

The bond, destined to GGU’s subsidiary Georgian Water and Power, offers a 3.5% premium over the Central Bank’s lari refinancing rate and will mature in five years.

The lari has slid by 15% in the past three months against the US dollar and is now trading at 2.66/$1. This prompted the Central Bank to stop easing its monetary policy and to keep interest rates stable at 6.5%.

Despite the fall in the value of the lari, BGEO was bullish about the issue. “This is in line with GGU’s funding strategy to continue to raise new funding in local currency, with longer-term maturity,” Irakli Gilauri, BGEO’s CEO, said in a statement.

Georgian Water and Power, which supplies water to Tbilisi, Mtskheta and Rustavi, was privatised in 2008. The sale was criticised because of a perceived lack of transparency over GGU’s British Virgin Islands registration.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Azerbaijan to switch to fully floating currency in 2017

DEC. 12 2016 (The Conway Bulletin) — Azerbaijan plans to switch to a fully floating currency next year, the Central Bank said, signalling more turbulence for the manat.

The Central Bank has relaxed the manat’s peg to the US dollar twice in the past couple of years, allowing it, in effect to lose half its value. It has also been managing a fall of around 19.5% since June to trade at 1.79/$.

Media quoted the head of the Central Bank, Elman Rustamov, as saying that macro-stability meant that the time was now right to move to a fully floating currency.

Many Azerbaijanis would disagree, though.

As The Conway Bulletin has reported previously, many ordinary Azerbaijanis have lost confidence in the manat and have been trying to withdraw their savings and convert them into US dollars. Many banks in Baku have run out of US dollars.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Uzbekistan’s acting-president signals changes to currency controls

NOV. 29 2016 (The Conway Bulletin) — Uzbekistan’s acting-president Shavkat Mirziyoyev published a draft decree on the presidential website laying out what appeared to be a manifesto to liberalise some of the tightest currency controls in the world.

In the draft decree, Mr Mirziyoyev wrote that restrictions would be lifted on foreign companies working in Uzbekistan and on Uzbeks taking money out of the country.

The document said that the main aims of the reforms were to “stimulate growth of the country’s export potential, improve the competitive- ness of domestic producers in foreign and domestic markets” and to “create equal conditions for all participants of foreign economic activity during their foreign exchange operations and the prohibition of the practice of privileges and preferences to individual companies or sectors”.

Specifically, the document said Uzbeks would be allowed to take up to $10,000 out of the country. Currently, Uzbeks are banned from taking cash out of the country. Foreign companies working in Uzbekistan have also complained about restrictions on repatriating profits. Under the draft regulations this should be easier.

Uzbekistan also operates a dual exchange rate with the official and the Black Market rate varying widely.

The draft legislation on the presidential website didn’t specifically tackle the issue of the dual exchange rates but loosening currency controls should bring them together.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Stock market: Georgian lari and Azerbaijani manat

DEC. 2 2016 (The Conway Bulletin) — Currencies in the South Caucasus have declined sharply over the past few weeks after a slew of poor economic data and a strengthening US dollar.

The Georgian lari hit an all-time low on Tuesday, when it traded at 2.53/$1. A year ago it traded at 1.84/$1. In the past two months, it has fallen by 8%.

The government in Tbilisi said the slide was due to a negative trade balance and the strengthening US dollar. In what could have been a spiral effect, demand for US dollars within Georgia soared, as people feared a sharper depreciation of the national currency.

Macroeconomic statistics have shown that Georgia’s GDP growth has slowed in the past months, disappointing observers.

The Azerbaijani manat, the world’s worst-performing currency in 2015, has also depreciated against the US dollar, down 6.5% in the last 60 days. It traded at 1.73 on Thursday, down almost 40% compared to last year.

Azerbaijan’s banks also stopped selling US dollars due to shortages.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Kazakhs cut out imported luxury goods to beat tough economic times

ALMATY/TARAZ, Kazakhstan, NOV. 21 2016 (The Conway Bulletin) — A stubborn, painful economic downturn has wiped 4% off the average Kazakhs’ purchasing power, the ranking.kz website reported, forcing people to cut out luxury items — especially those imported from abroad.

Aiganym Dosmail, who works in an advertising agency in Almaty, said that she had cut out on buying luxury items that had been imported and ballooned in price since the devaluation of the tenge last year.

“I optimise my spending. Previously, I bought a lot of unnecessary stuff and now I buy only those goods that last long and are good quality. It is of course sad that previously marsh- mallows cost 300 tenge and now they cost 800 tenge,” she told the Bulletin.

The tenge lost half its value last year after the government reluctantly cut its peg to the US dollar. Low oil prices and a recession in Russia had pressured the Kazakh economy, and others across the region, into currency devaluations and budget cuts.

Worst hit are importers of luxury goods. Most Kazakhs now can’t afford to buy the foreign goods that they could afford even a year earlier.

Unlike Ms Dosmail, Aigerim Zhanuzak’s hairdressing salon in Taraz in the south of the country has been far less affected. She said that most of her clients are self-styled middle class Kazakhs and that she hasn’t had to put up her costs because she doesn’t have may import costs.

“My salon is targeting middle income and higher class people which means the crisis doesn’t impact people when it comes to personal comfort. People always want to eat and lto ook good,” she said. “If we talk about the financial crisis in our town then it has hit the lower-income population. Goods have become more expensive, public transport as well, but salaries have not increased, unfortunately.”

ENDS

(News report from Issue No. 306, published on Nov. 25 2016)

Currency booths start selling US dollars again in Azerbaijan

BAKU, SEPT. 15 2016 (The Conway Bulletin) – Currency exchanges in Azerbaijan have started selling US dollars once again after the Central Bank sold $300m and increased interest rates to their highest level since 2008 to support the manat.

The near-emergency measures were taken last week after currency booths stopped selling US dollars because of a lack of confidence in the Azerbaijani manat which had lost 11% of its value since the start of June. Confidence in the manat was destroyed last year when two devaluations wiped 50% off the value of the currency.

Azerbaijan’s economy is reliant on oil for its revenues and the government has been slashing projects to account for the drop in revenues. Even so, economists forecast a GDP drop this year.

“There is a crisis in every single sector of the economy, starting from trade, ending in construction, agriculture, and services,” Zohrab Ismayilov, a Tbilisi-based Azerbaijani economist told The Conway Bulletin.

And this is being felt at street level where jobs have been lost, savings cut in half and prospects diminished. Earlier this year a series of protests across the country, unusual in Azerbaijan where the security forces normally maintain a tight grip, shook the government.

Rashad, 31, the owner of a small catering business in Baku, told the Conway Bulletin that like most Azerbaijanis he has had to resort to using the Black Market to exchange manat into US dollars.

“I had to have dollars and at the weekend I could not find an open bank which has a running exchange service. So, I found a friend who knows an illegal exchange place and did my exchange there,” he said.

And the economy is tightening.

“Because of the economic situation, companies are cutting their costs and the market is becoming too narrow,” he said.

Mr Ismayilov, the economist, said that the Azerbaijani government could only prop up the currency for so long.

“Everybody now expects the third devaluation,” he said.

“It is very likely to happen by the end of this year. And it will be a big blow to the economy.”

ENDS

(News report from Issue No. 296, published on Sept. 16 2016)