The behavior of the US dollar exchange rate has been very strange in the recent times. Yesterday there was not foreign currency transaction in the NASDAQ OEMEX Armenia. The same thing happened on January 26 as well. In fact two days the buyers and sellers of dollar could not come to an agreed price. The demanded price of dollar was 386 drams for one dollar, but the price of supply was 387.5 drams. This means that there is instability with dollar, and even though the situation seems to be stabile, banks are waiting too.
It is understandable why the foreign currency exchange market participants are confused because the tendencies with the exchange rates have been in contrary with the predictions during the past 1-1,5 months. During the past years the price of dollar used to go down before the New Year time because most of families used to spend dollars in order to buy food for the celebration times. People working in other countries used to also send money to their families or return home with money in the pockets. During those days the CB used to argue that the families that used to receive financial support from other countries were being embezzled. But this time the situation was quite different and dollar started to grow in the price.
On December 17 the average price of dollar was 380-381, on December 28 it reached 385. Later the exchange rate was around 383-384 drams. Such thing had not happened before that. Both consumers, journalists and experts were surprised. Of course there were attempts to explain that situation, but due to the shady processes, non-transparent system and lack of reliable information there were no explanations. Optimists may say that the government was kind enough this year not to embezzle the families that live on foreign transfers.
The situation after the celebrations was not predictable either as the dollar price grew to 388 drams. During the past ten days the price has started going down.
Has this change influenced on the behavior of people and financial institutions? In November 2011 the capacity of bank credits provided by trade banks was 1,210million drams. It is more by 358 billion or 42% than in November 2010. There have been more credits issued in foreign currencies than the national currency, and the capacity of such credits increased by 50% and amounted 727 billion drams. This means that banks trusted the foreign currencies more, which was a common practice as they had offered 1-2% more interest rates for foreign currencies.
It is very strange but ordinary citizens have been trusting the national currency more. The money deposits in the national currency have grown by 38.3% during the 12 months in 2011 and amounted 272.4 billion drams in November. The overall capacity of deposits grew by 26.9%. The deposits in the national currency are 37% and in foreign currencies – 63%.
It is impossible to say what changes the exchange rates may have during the year. However, it is clear that the authorities will not let rapid changes in the exchange rate prices happen. Definitely the US dollar will continue growing in the price even slowly during the year because the authorities have understood that the vice process is harming the domestic producers and exporters. On the other hand, there will not be rapid inflation either because it will hit the budgets of families living on the account of foreign transfers. By the way, such families are many and they cover 30-35% of the population. In election periods governments never ignore these groups of people as they can be their best constituencies.