The National Bank of Georgia (NBG) has doubled currency intervention volume and sold 40 million USD at currency auctions. The averaged weighed exchange rate made up 2.3264 GEL against USD.
Having sold 20 million USD and extracted 46 million GEL from the market (20×2.3177), the NBG has provoked the GEL mass reduction in turnover by 93 million GEL (40X2.3264).
The National Bank monetary policy strategy, including in the currency policy part, has been published on the NBG website since 2013. According to the strategy, Georgia has introduced the floating exchange rate, and one of the objectives for the NBG interventions is to minimize the excessive volatility of the exchange rate.
Consequently, when distinct major streams cause excessive volatility of the exchange rate and when fundamental factors create ground for that, the NBG tries to smooth the effect through currency interventions.
At this stage, effect of external shocks on the national currency have disappeared and only temporary factors provoke the exchange rate volatility – through several major transactions that is accompanied by pre-election expectations.
The recent intervention was carried out to alleviate this short-term volatility. The NBG has carried out similar interventions previously too and naturally will implement in the future too. However, this strategy does not imply that the NBG will interfere in any volatility.