Currency Curve: Dram “defies” surrounding volatility, appreciates against dollar

Currency Curve: Dram “defies” surrounding volatility, appreciates against dollar


On Monday evening, the Armenian dram has strengthened its position against the dollar and reached 479.49 AMD for $1, rising by 1.55 drams. For some such a behavior of the Armenian currency is “illogical” considering the high currency volatility existing in the country’s neighborhood.

Since last year, when the dram was lost some 20 percent of its value, the Armenian currency has been relatively stable despite greater volatility in a number of former Soviet states, including Georgia, Azerbaijan and Eurasian Economic Union member states, primarily Russia and Kazakhstan.

On Monday, for example, Azerbaijan, whose economy was weakened by the drop in international oil prices, announced a switch to the so-called floating rate policy for the national currency. After the decision Azerbaijan’s national currency, the manat, lost more than 47 percent of its value against major international currencies.

Interestingly, unlike, for example, the Russian ruble, the Armenian dram continued to appreciate last week after the increase of the U.S. refinancing rate by 0.25 percentage points, while the only rate change for the last 10 years immediately reflected on Armenia’s largest economic partner, Russia, whose national currency hit its lowest trading at over 70 rubles per U.S. dollar.

In the first 10 days of December, $1 could be bought in Armenia by more than 485 drams, whereas, for example, the exchange rate of AMD against dollar, on December 11, dropped from 485.24 by almost 6 drams, or 1.5 percent.

According to the former Central Bank governor, economist Bagrat Asatryan, the U.S. refinancing interest rate rise has been an expected step and has had a minor impact on the important economic indicators.

“It’s been a long expected action, and everything happened until then. However, AMD-USD relationship has nothing to do with the interest rate rise in the US. There are other factors, such as pre-holiday days, and especially economic relations with Russia,” Asatryan told ArmeniaNow.

Economist Vilen Khachatryan also partly ascribes the appreciation of the Armenian dram to pre-holiday trade, which has become a trend in Armenia for a long time.

“This is not a real appreciation. After the interest rate rise the Russian ruble fluctuates between 71 and 72 per dollar. The ruble is devaluating here, too. But the dram is appreciating. This is not objective: it can’t be so,” the economist told ArmeniaNow.

Along with appreciation of the dram the Russian ruble sharply depreciated hitting unprecedented lows. On Monday, the Central Bank set the exchange rate of the Armenian dram at 6.74 per RUR. If this rate is maintained or reduced, then earned money by Armenian labor migrants in Russia, who return home at the end of the year, will buy less AMD, that is, the revenue will reduce.