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The Dollar Weakening, but the Lari not Recovering

The dollar began to weaken again in the world. In the last days the euro rose to 1,14  against the dollar, the Russian ruble, Azerbaijani manat, Armenian dram, the Turkish lira have also strengthened.

But the weakening of the dollar had no impact on the value of the Georgian lari  and the Ukrainian hryvnia. It should be noted that in June, positive macroeconomic expectations of the US economy weakened, especially against the backdrop of the recent rise in the rate of the labor market development. Parallel to this, in June  the consumer confidence index  rose by  4 points and  amounted to 94.6 points. Consumer prices have also increased.

Despite the positive macroeconomic indicators, the dollar declines against the background of expectations of policy review of the Federal Reserve and the growth of the refinancing rate. The depreciation of the US dollar affected the currency rate  not only in the leading but also in  neighboring countries – for example, the Russian ruble slightly, but still gained its value , the same thing happens with the Azerbaijani manat. While the hryvnia rate  has not changed.

The Armenian dram has also strengthened, which a week ago cost 477, and now – 473 drams per dollar, as well as  the Turkish lira. Against this background, the Georgian lari continues weakening from 2.23 to 2.24 per dollar. According to the banking expert  Lia Eliava, the Georgian national currency is mainly influenced by external factors and the activities of large banks, and not the international situation.

“The demand for foreign currency from Georgian banks is not an indicator of the economic situation in Georgia, but rather demonstrates the needs of the banks. Since the exchange rate in the country is set untransparently that is a temptation to get additional profit from exchange rate fluctuations. This applies to both banks and other financial institutions. With regard to the depreciation of the dollar, it is associated with a reduction in the pace of US economic growth, “- she says.

In  her words, a possible strengthening of the Lari will not be due to the weakening of the dollar. “If Georgia receives  foreign aid, part of it will settle in the National Bank, part in the commercial banks, and this may lead to the lari’s  further appreciation . But if the capital outflow continues, the rate will fall again. So changes in the dollar’s value insignificantly affect the Georgian national currency, “-  the expert adds.