Armenian Dram Getting Expensive!?

[alby]

I was in Armenia last October (2005). The Dollar was between 443-448 against the Dram. Now, a year later the dollar is at 379 (as of 10/30/06 exactly at 378.93), that’s almost 18%.

 

I was there in October of 2000 also, the Dollar was about 550 Dram, which means from 2000 to 2005 that is in five years the Dram went up by 22% (4.4% in one year) verses 18% in one year.

 

Has the country’s economy grown so dramatically to justify such a rise in Dram’s value in such a short period of time or is it just an artificial manipulation of the currency by some?

 

The consequences of such drastic rise in value of Dram is making the poor poorer, decrease the number of visitors and increase the price of exports, just to mention a few of the problems.

[Boghos]

The Dram´s strength is a consequence of two currencies behaviour: the Ruble´s strength, by far the most important currency for Armenia when US aid is excluded and the Euro´s move from below 1 to the USD to around 1.27 now.Moreover, and this should not be taken lightly Armenia has made great progress in the economic front in the past few years. This alone justifies a stronger Dram

 

But Armenians in Armenia are not getting poorer because of that. Exactly the contrary. And exports may suffer a bit. I think tourism, still at infancy is not affected given that prices in Armenia are still very low. And the greatest contingent of tourists; diasporan Armenians are not that sensitiv to exchange rates.

 

So, forget conspiracy theories and take it for what it is: better fundamentals and the dollar devaluation vis-a-vis the Ruble and the Euro.

[MosJan]

it's not only Dram going up but also Dollar going dawn a bit

[alby]

The justifications are really interesting as to why Dram is getting up in value this drastically.

 

It is true that some facts play a role in this matter but the sharp trend upward is beyond any norms.

 

The U.S. is trying to force China to revalue its money because its cheap prices in this country is causing astronomical deficits against China.

 

A few years ago one American businessman single handedly caused a sharp drop in the Russian Ruble, so yes people can manipulate currency rates. They always have.

 

Another case was the Iranian Rial where the rate against the Dollar was 70 Rials during the Shah and immediately after the revolution, the Rial took a deep dive. What changed? Did the oil disappear from Iran or what?!

 

Last year if one sent a hundred Dollars to a poor relative in Armenia, it turned into 44,500 Drams, now the same hundred Dollars is 37,900 Dram, a 6,600 Dram difference. The price of gas has gone up there too along with other needed items but most wages have not gone up proportionally.

[Boghos]

Another case was the Iranian Rial where the rate against the Dollar was 70 Rials during the Shah and immediately after the revolution, the Rial took a deep dive. What changed? Did the oil disappear from Iran or what?!

 

Last year if one sent a hundred Dollars to a poor relative in Armenia, it turned into 44,500 Drams, now the same hundred Dollars is 37,900 Dram, a 6,600 Dram difference. The price of gas has gone up there too along with other needed items but most wages have not gone up proportionally.

 

Well if some crazy Ayatollah took over and you were uncertain about the future what would you do? Hold rials or buy dollars? That´s why the Rial took a dive. It had to do with uncertainty and it is a very common phenomenon worldwide. I can give you tens of examples: starting with Kuwait, the Dinar was down a lot overseas after Saddam invaded, was the oil still there? Yes. Was the rest of the world going to let Saddam get away with it? No.

 

If you are talking remittances, of course, if your income is in dollar and you spend in Drams, than you suffered. But a country, even Armenia, is not just remittances. As much as it may seem that way.

Edited October 31, 2006 by Boghos

[alby]

The latest figure on Armenian Dram as of today (Nov 20, 2006) is: 373.84. A drop of over five Drams in 20 days.

 

Now, for those who do not think it is that critical for the well being of the country to control the currency fluctuation, many companies are starting to feel the pinch.

IT companise are one, here's the link:

Armenian IT companies

 

Forgive me for still being concerned about this in this forum.

But is there anyone in THIS FORUM who is in the field of finance and economy and who can explain in logical sense if this fluctuation is normal or not? Especially when I notice other currencies don't act in the same manner.

 

I personally don't think it is.

[gamavor]

The constant flow of dollars to Armenia is the reason, rather than any too positive too happy figures. If the central bank doesn't take appropriate measures it will be a devastating blow to import sales.