Tashkent, Uzbekistan (UzDaily.uz) — The US dollar/soum exchange rate is hovering near 11,785 soums per US dollar. It has changed little over the past week, since our previous review.
Following a notable decline in the US dollar in August-September, the market has shifted to consolidation, mainly within a range of 11,750-11,850 soums per US dollar. The soum has retained most of its gains in recent months despite the strengthening of the US dollar globally.
The macroeconomic picture remains strong. In January-August, industrial production in Uzbekistan increased by 8% year on year to 926.5 trillion soums, while manufacturing grew by 9.1%.
Retail trade turnover increased by 18.8%, market services by 17%, and construction by 11.8%.
At the same time, real wages rose by 10.9% in the first half of the year, while remittances increased by 13.1% in the second quarter to US$5.5 billion.
Growth in household incomes and remittance volumes is supporting the domestic market and the supply of foreign currency from the population.
However, strong domestic demand is also creating the main risk for the soum. In the first eight months, imports increased by 16.3% to US$34.5 billion, while exports declined by 3.4% to US$22.9 billion.
This is increasing businesses’ demand for foreign currency. Rising real incomes may also support consumption and imports, potentially increasing inflationary pressure going forward.
At the same time, the labour market is gradually cooling: the number of vacancies fell by 9.8% in the second quarter compared with the same period last year, while labour supply is growing faster than demand.
Thus, fundamental factors remain balanced at present: industrial growth, remittances and tight monetary conditions are supporting the soum, while rapidly growing imports and strong domestic demand are limiting the potential for further appreciation.
For the coming week, we consider 11,700-11,900 soums per US dollar to be the base range for the US dollar/soum pair.
