Tashkent, Uzbekistan (UzDaily.uz) — In recent weeks, the US dollar has mostly traded in the range of 11,700–11,850 soums after a prolonged decline from its spring highs. Overall, the soum has retained most of its earlier gains despite periodic attempts by the dollar to recover lost ground.
September proved favourable for the national currency, with the dollar exchange rate falling from 11,800 to 11,775 soums. As a result, the soum strengthened by 0.5% during the month. Since the beginning of the year, it has appreciated by 2.5%.
After the dollar surged above 12,200 soums in February, a sustained downward trend in the dollar/soum pair emerged in the foreign exchange market.
Fundamental support for Uzbekistan’s national currency remains relatively strong. In the first half of the year, foreign currency supply in the domestic market, excluding Central Bank operations, increased by 31% to US$27.8 billion, while demand rose by 20% to US$32 billion.
As a result, the foreign currency deficit narrowed by US$1.3 billion, or 24%. Significant inflows of remittances and the high level of international reserves are also providing additional support to the market.
Monetary policy also remains an important factor. In September, the Central Bank kept its policy rate at 14%, with annual inflation at 6.2% and core inflation at around 5.5%. The high real interest rate supports the attractiveness of savings in the national currency, while the soum’s appreciation also helps contain imported inflation.
At the same time, sustained domestic demand may put pressure on the national currency. Strong consumer and investment activity stimulates imports and increases businesses’ need for foreign currency. Another risk for the soum is the external environment, particularly amid a strengthening US dollar on global markets.
Nevertheless, the balance of factors remains favourable for now. Against this backdrop, the baseline range for the US dollar over the coming week remains 11,700–11,900 soums.
Anna Bodrova,
Alpari Analyst
