Armenian currency set to consolidate, bank expert says

July 22 2004


YEREVAN, JULY 22, ARMENPRESS: Asked to explain what are the
reasons behind an unprecedented slump of US Dollar against the
Armenian dram, Vladimir Badalian, the chairman of the Union of
Armenian Banks, argued it was part of radical changes awaiting the
national currency, an indication that the dram is consolidating its
value against hard currencies. He then added that the dollar will
tend to lose against the dram. One of the arguments, he cited in
favor of that theory, were the developments in international currency
markets with euro consolidating against dollar. He said that process
could not failed to have its impact on Armenian market.
He then predicted that in the near future euro will grab a bigger
place in Armenia’s market forcing Dollar to yield its positions,
which he said is normal given Armenia’s drive towards close
integration with Europe, especially that 40 percent of its foreign
trade falls on EU countries.
Badalian said also that the consolidation of dram will prompt
participants of the domestic market to keep their deposits in drams.
Unlike some years ago now many depositors choose to keep their
accounts in drams. He admitted that a weaker dollar is sustaining
some damages to exporting companies, but added that it should not
have any effect on export volumes, as their structure is such that
allows the companies to maneuver.
He attributed high domestic prices, though the dollar has
seriously slumped against Armenian Dram, to the absence of criteria
typical of free trade.
Earlier this week a Central Bank official cited two arguments to
explain the decline of exchange rate of US dollar. The head of the
Financial Markets department of Armenia’s Central Bank, Gayane
Matevosyan, said one reason was the increased private inflows of cash
from abroad., which she said have increased by 46 percent if compared
to the same period last year and a second reason was an increase in
exports, which she said if compared to the first half of last year,
have risen by 40 percent.