bne IntelliNews -
The Armenian dram tumbled to record lows against the euro and the dollar on December 17, crossing the ceiling of AMD700 to the euro and AMD560 to the dollar, before recovering to be quoted early December 18 at AMD471. The Armenian unit of Russian-owned VTB Bank denied a report in a local online publication that it had sold $200,000 to an individual at the exchange rate of AMD760 per dollar.
The chairman of the Central Bank of Armenia (CBA), Arthur Javadian, sought to downplay the dram’s at one point 37% devaluation against the greenback over the last three months, according to news agency Arka. On October 1, the exchange rate was AMD407 to the dollar.
Linked to the Russian ruble’s freefall, Javadian assured that “currently the dollar is overvalued, while the Armenian dram is too devalued,” chalking up the discrepancies to panic and speculation by investors.
Echoing Javadian, Armenian Prime Minister Hovik Abrahamyan said in a statement on December 17 that the government will stick to its floating exchange rate policy to ward off long-term instability and he reiterated the situation is the result of global and regional developments.
So far, Armenians have shown little sign of panic – they haven't lined up at bureaux de change to purchase hard currency, as in March 2009 when the dram lost about 30% of its value against the dollar in a few hours.
Local banks have tried to keep the situation under their control – some limiting the sale of foreign currencies, some sold them only to their clients, and some stopped selling them at all.
To stabilize the situation and curb jobbing at forex market, the CBA raised the Lombard repor rate from 10.25% to 21% and started currency interventions via everyday auctions with limited amounts announced beforehand. Last week the CBA sold daily $6mn to banks, while this week it reduced those daily sales to $4mn.
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