Starting from today, August 20, the Uzbek banks began selling foreign currency in cash. According to the Central Bank (CB), this move was "part of the liberalization of the foreign exchange market."
Today, the soum lost 3.5%, from 9,061 to 9,384 soums (+323 soums), against the US dollar.
“The free sale of dollars was aimed at stabilizing the exchange rates based on the supply and demand,” the regulator said, adding that it would no longer fix the foreign exchange buy and sale rates.
The soum lost 10% in the last 10 days, which, according to the Central Bank, was due to the increasing risks in the global economy and the trade wars, which led to an economic slowdown in the USA, China, the eurozone and other countries. In reaction to which, Uzbekistan’s main trading partner – China devalued its yuan, thus making Chinese products more competitive and boostingChinese imports into Uzbekistan.
The Central Bank said it didn’t rule out further volatility, due to external factors and that it would continue to closely monitor the situation in the domestic foreign exchange market and use market mechanisms to mitigate the effects of external shocks and ensure the balance of key macroeconomic indicators.
However, the CB didn’t mention that it nearly doubled the money supply for budget purposes in the last two years, and the current volatility was in fact the kickback for artificial maintaining of the soum's rate since its devaluation in September, 2017. The soum current devaluation may create speculation and panic, with people, scared for their savings, rushing to buy dollars, which will lead to further soum devaluation.