The central bank supplied USD 30 million to the market at a regular foreign exchange auction on Tuesday. On this day, the USD exchange rate reached MNT 2,798.23. At the end of last month, foreign currency deposits increased by more than 30 percent, affecting the money supply. Mongolia’s official foreign exchange (FX) reserves stood at USD 4.1 billion as of the end of March. This is approximately the amount required to meet the annual import demand. Global stock market activity is declining due to the economic downturn. Investors are selling risky securities and flocking to highly liquidassets. Specifically, government bond yield increased by an average of 19.2 percent this month compared to the same period last year, and the price decreased by 2.2 percent. As economists predict, the possibility to attract capital from foreign markets are shrinking. The lack of a recovery in exports is likely to pose a significant challenge to the foreign exchange market. Negotiations are ongoing to extend the USD two billion swap agreement with the People’s Bank of China, which was due in July this year. Extending the swap agreement will relieve the burden of short-term debt. This will have a major impact on the stability of the tugrik.

Published Date:2020-05-22