Tag Archives: currency

Azerbaijan raises interest rates to 8-year high

SEPT. 9 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank raised its key interest rate to 15% from 9.5%, its highest level since 2008, to try to boost confidence in the ailing currency.

The manat has been falling in value for weeks, hitting an all-time low of 1.67/$1 on Friday, setting off fears of another currency crisis. Last year, the Central Bank devalued its currency twice, undermining confidence and wiping out people’s manat-based savings. A series of protests across the country against the worsening economic conditions, almost unprecedented in Azerbaijan, unnerved the Azerbaijani leadership.

The currency had been gaining in value this year until the end of May when it began to slip again. The manat has now lost 11% of its value since May 30.

The day before, the Azerbaijani Central Bank had sold $100m to try to prop up its currency.

Last week, Bloomberg News reported that local banks and exchange bureaus had suspended sales of foreign currencies due to the high demand.

Ratings agency Moody’s said the government should change regulations on capital controls brought in earlier this year.

“The restrictions on foreign-currency sales have led to the emergence of a parallel exchange market, which in our view speaks to the challenges the central bank faces to stem dollar demand and elevates risks of an accelerated depreciation in the official exchange rate,” Moody’s analysts said in a report.

Low oil prices have hit Azerbaijan’s economy hard over the past two years. Azerbaijan ‘s economy is particularly dependent on oil revenues as it generates around 3/4 of its income.

ENDS

(News report from Issue No. 295, published on Sept. 9 2016)

Azerbaijan halts currency trades

SEPT. 2 2016 (The Conway Bulletin) — Banks in Azerbaijan’s capital have stopped selling foreign currency as demand soared after the Azerbaijani manat started to depreciate, triggering memories of the currency’s double devaluation last year.

The news will be disappointing to Central Banks across the Central Asia and South Caucasus region who had hoped to have moved away from the currency crises of 2014 and 2015.

According to sources in Baku, the manat traded at 1.68/$1, 5% lower than last month. They said that many Azerbaijanis now fear that another crisis is around the corner and have tried to hoard foreign currency. Bloomberg reported that 15 banks in Baku and the city’s international airport had stopped selling US dollars, a sign that demand had surpassed availability.

Azerbaijan’s economy is particularly vulnerable to the vagaries of oil prices, which have collapsed since 2014, and it is set to shrink this year for the first time since the mid-1990s.

ENDS

(News report from Issue No. 294, published on Sept. 2 2016)

Azerbaijan’s CBank raises interest rates to 9.5%

AUG. 8 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank raised its key interest rate to 9.5% from 7%, its highest level since 2008, in an effort to bolster its currency.

Azerbaijan’s economy is based on oil, meaning that a fall in prices has hit its economy hard. Analysts have predicted a recession this year, the first since the 1990s.

The manat currency was devalued twice last year. It had been strengthening throughout 2016 but has lost around 10% of its value since June and is, according to Bloomberg, now one of the five worst performing currencies. The Central Bank increased its key interest rate to 5% from 3% in February.

ENDS

(News report from Issue No. 292, published on Aug. 12 2016)

Kazakh tenge slides to five-month low

ALMATY, JULY 28 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said it will not intervene to prop up the tenge currency after it lost 3.5% of its value over the past week, hitting a five-month low of 354/$1 on Thursday.

This is the sharpest drop since February, the tail-end of a two year fall for the tenge during which it has lost half its value against the US dollar.

Even so, Adil Mukhamedzhanov, deputy director for monetary operations at the Central Bank, told Kazakh media that interventions would be light.

“Several factors impacted the exchange rate, chiefly low oil prices and worsening exchange rates of our trading partners,” he was quoted as saying.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Volatility to weaken the Kazakh tenge

AUG 1 2016 (The Conway Bulletin) — It has taken Kazakhstan a long time, but it could finally have reached its goal of having a free-floating currency.

The nightmare of last August when the tenge depreciated sharply against the US dollar after the Central Bank removed its currency peg, seems over.

That was the uncertainty of having a Central Bank chief, Kairat Kelimbetov, who didn’t show resolve and authority, and the uncertainty of living through a period of falling oil prices.

Gradually, since November 2015, when Daniyar Akishev was made the Central Bank chief, Kazakhstan has switched to a more hands-off policy, allowing the tenge to slide as the market demanded.

This new policy created another kind of uncertainty. The tenge will float freely, swept by oil prices and the performance of other currencies in the region.

This could mean that, with oil prices sliding back towards $40/barrel and the US Federal Reserve planning to raise interest rates, Kazakhstan could soon be facing an even weaker tenge.

The tenge depreciated by 5% this month, to 354/$1 and the outlook for the next few months is not promising. Analysts have said that this could be the beginning of a gradual slide that only much higher oil prices could reverse.

In an oil price scenario that has come to be known as ‘lower for longer’, a three-figure oil price, as it was in 2014, will remain unlikely for a while.

In addition, the Russian rouble seems to be limping behind the US dollar, which is causing a negative ripple effect on currencies across Central Asia and the South Caucasus. Kazakhstan’s membership of the Eurasian Economic Union bloc is, in this case, a determining factor for the tenge.

Domestically, too, with apparent terror attacks in western Kazakhstan and unprecedented violence on the streets of Almaty, the situation is not looking good. Insecurity has never been a foundation for currency stability.

And then, of course, there is the economic headache of negative growth, and falling oil production which will continue to undermine the tenge.

The tenge is unlikely to thrive in this contingency.

The ‘$1 stores’ that mushroomed across Kazakhstan towards the end of last year, selling items at the fixed price of 300 tenge, might now be forced to adjust their price, possibly on a daily basis, to reflect a worsening exchange rate.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Georgia Central Bank chief says he may let lari value fall

TBILISI, JULY 21 2016 (The Conway Bulletin) — Koba Gvenetadze, the new chief of the Georgian Central Bank, hinted that he wants the lari currency to slide further to keep pace with Georgia’s neighbours who have all seen their currencies fall heavily over the past two years.

Mr Gvenetadze said that the lari had strengthened too much against the US dollar earlier this year and as soon as the Central Bank relaxed its interventions in the currency market in mid-June, it slid to 2.34/$1, down from a high of 2.13/$1.

“Part of the population thinks that a steady foreign exchange is a synonym of stability, but that’s wrong,” Mr Gvenetadze told the newspaper Rezonansi in an interview designed to lay out his monetary policy. Mr Gvenetadze took over as the Central Bank chief in March.

He said that if people continue to use US dollar-equivalent measures to calculate their wealth or the value of their property, the lari will continue to suffer.

“Sometimes unpopular decisions can be made, but we need to see what happens in the future,” Mr Gvenetadze said.

After losing 27% of its value in 2015, the lari had strengthened significantly against the dollar, gaining 13% by June. Since then, though, it has fallen back to January levels.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazakhstan’s C. Bank bets against sterling

JULY 8 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank chief Daniyar Akishev said he bet against the sterling ahead of Britain’s referendum to leave the EU, commonly known as Brexit. As he expected market volatility in the aftermath of the vote, Mr Akishev said the Central Bank opened a long position to sell off part of its sterling holdings, effectively gaining from the post-Brexit plunge of the British currency against the US dollar.

ENDS

(News report from Issue No. 289, published on July 15 2016)

Tajikistan publishes negative forecasts for Somoni currency

JULY 14 2016 (The Conway Bulletin) — Tajikistan’s finance ministry published a negative forecast for the somoni currency exchange rate over the next few years, saying that the economic crisis that has hit the region since mid-2014 could be far from over. According to the official forecast, the somoni will weaken against the US dollar by 21% next year and by a further 8% in 2018. This week the official exchange rate was 7.9/$1. Much like other currencies in the region, the Tajik somoni has lost a third of its value sine mid-2014, mainly because of a recession in Russia, weakness in oil and gas prices and a drop in confidence in Emerging Markets.

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(News report from Issue No. 289, published on July 15 2016)

Brexit knocks economies in Kazakhstan & Georgia

JUNE 30 2016 (The Conway Bulletin) — Brexit, Britain’s vote to leave the EU in a referendum on June 23, pushed down stock markets, commodities and currencies worldwide, including in South Caucasus and Central Asia where politicians and business leaders warned of problems ahead.

Kazakhstan was hit by both currency instability and the sudden drop in oil prices, which fell below the $50/barrel threshold it had recovered to earlier this year after the rout of 2014 and 2015.

Uzakbai Karabalin, Kazakhstan’s former oil minister and now deputy chairman of the oil and gas lobby group KAZENERGY, said the government will have to revise down the baseline for oil prices in the national budget this year.

“[Brexit] has already affected oil prices,” he said. “The first response was a decline. Now the economic base price is $50/barrel.”

Previously, the government had said the baseline for this year could have grown to $60/barrel, so a drop to $50/barrel is a pessimistic assessment of the impact of Brexit.

Georgia, less impacted by low oil prices, felt the Brexit effect on its currency, the lari. The lari has fallen by 4.5% since June 23 and Dimitry Kumsishvili, the economy minister, blamed the Brexit result.

“This is most likely a one-off that is directly connected to the UK’s decision to quit the European Union. Of course, this immediately affects our currency,” Mr Kumsishvili said.

He warned that the impact of Brexit had only just started to feed through into the world’s economy and that more economic shocks in the region were likely.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Currencies: Kazakhstan’s tenge, Azerbaijan’s manat

JULY 1 2016 (The Conway Bulletin) – Since mid-2014, a strong US dollar and downward pressures on oil prices have hit economies across Central Asia and the South Caucasus.

Currencies in the region suffered and, despite all the efforts from Central Banks to keep the exchange rate steady by intervening in the market, the fall was inevitable.

Compared to two years ago, all currencies have lost between 15% to 50% of their value. Oil exporting countries (in green in the graph) have fared worse than oil importing countries (pictured in red).

The Kazakh and Azerbaijani Central Banks decided to abandon the currency peg to the US dollar in 2015, causing a plunge in the value of the tenge and the manat. In 2015, these two were among the worst-performing cur- rencies in the world, not just the region.

Oil importers have acted in the opposite direction. In Georgia and Kyrgyzstan, currencies stabilised in the second half of 2015 and Central Banks have tightly controlled exchange rates since.

ENDS

(News report from Issue No. 287, published on July 1 2016)