Wrong speculation led to increase in value of MNT

Apr 9 • Banking, News • 713 Views • No Comments on Wrong speculation led to increase in value of MNT

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J.Bataa, Head of the Financing Market Department of the Currency and Economics Office of the Mongol Bank talks about the factors of increased value of MNT.

Q: Value of MNT against USD has been increasing in the last few days. Can you explain the reasons?

J.Bataa: Value of MNT against USD has increased by 6.5 percent if compared to beginning of the year and by 1.2 percent in the last five days. Trade turnover deficit has reached 409.4 million USD since the beginning of this year because import has doubled against export. The foreign currency inflow is less than the outflow and the netflow is negative or minus as a result of increase in import. These are the reasons for weakening value of MNT in the short run.

Value of MNT has been increasing for the last days because of wrong speculation. This can be explained by number of factors.

First of all, people expects that value of MNT will go up because of wool and cashmere export is increased in Spring. It is still believed that wool and cashmere export will affect the value of MNT but in fact it has little effect in comparison to mining export.

Secondly, the Development Bank of Mongolia has released bonds worth USD 580 million in foreign markets and Mongolian Mining Corporation has successfully released bonds worth USD 600 million. This information to the public also provided expectancy that the value of MNT would go up. Foreign currency reserves of Mongol Bank will be increased by the above releasing of bonds and thus decrease the value of MNT. In addition, the money raised by the Development bank will be used for epic projects including Railways project, Roads project, 5th thermal power station and Sainshand project. This means the money will be outflown from the country as raw materials, techniques and technologies will be imported for these large projects.

At last, number of commercial banks are discussing to release bonds at foreign markets. This also provided the some idea that the value of MNT would go up.

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