ECONOMY: Commerzbank AG And UBS AG Advise Russia, Ukraine And Kazakhstan To Move Toward A Free Float Like Armenia Did (groong.usc.edu)

ArmInfo
2009-03-05 23:18:00

ArmInfo. Commerzbank AG and UBS AG advise Russia, Ukraine and Kazakhstan to abandon their currency management regimes and move toward a free float like nearby Armenia to protect their economies against the global credit crisis, reports Bloomberg.

Armenia devalued the dram 22 percent against the dollar during the past two days as part of a $540 million credit- line agreement with the International Monetary Fund. The move will help reignite the "struggling" economy, central bank chief Artus Javadyan said.

Russia undertook what the central bank described as a "gradual devaluation" of the ruble, spending 36 percent of its foreign-currency reserves to curtail a 35 percent depreciation versus the dollar since August. In Ukraine, policy makers have drained 24 percent of reserves since August to stem a 41 percent drop in the hryvnia with "daily"
interventions, according to the central bank.

"Armenia has done better than all the others by moving straight to a free float," said Michael Ganske, head of emerging-markets research in London at Commerzbank, which ranks itself among the 10 biggest traders of the ruble worldwide. "It gives them the flexibility to adjust to new economic scenarios. In the current global environment it's very, very hard to maintain an overvalued currency."

The artificially strong Armenian dram was hurting economic growth and boosting unemployment, Nienke Oomes, the IMF's representative to the country, said yesterday, according to a central bank statement. "The best option is for the currency to float freely and for the market to determine the rate itself."