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What to expect from dollar in 2018. Expert forecasts

Last year, the situation on the foreign exchange market remained relatively stable. There were no serious and sharp fluctuations in the currency rates. Experts predict that the trend will continue in 2018. However, in the end, the American currency will a little, but grow in price.

Migrants and exports will help Kyrgyz som

According to Aigul Berdigulova, a specialist of the Chief Economist Group of the Eurasian Development Bank, serious growth of the dollar exchange rate in Kyrgyzstan should not be expected. There is a restoration of the rates of economic development in the countries — trade partners of the republic. This will have a positive effect on the situation in Kyrgyzstan.

«Forecasted economic recovery suggests that export revenues from the supply of Kyrgyz goods to the Eurasian Economic Union market will continue to grow, as well as the inflow of remittances sent by labor migrants. This will restrain the systematic weakening of som against the U.S. dollar with the general tendency to weakening of the currencies of developing markets,» the expert noted.

According to our estimates, the average annual exchange rate of U.S. dollar in 2018 will be 71.5 soms.

Aigul Berdigulova

The head of the Association of Foreign Investors Iskender Sharsheev partly agrees with the forecast. He is sure that the National Bank will not allow a sharp increase in the dollar’s rate. But there are also disadvantages in this.

«If the dollar was expensive, exports would revive. But the population and the government fear: if we set som free, this will seriously damage the social stability of the country, because it will lead to a sharp rise in prices. But the question is simple: either we earn by the entire country, exporters start developing and dollars come to the republic, or we continue to have a strong som and a weakly developing trade,» Iskender Sharsheev believes.

Cold war in progress

Economist Kubanychbek Idinov believes that in 2018 dollar exchange rate will be more stable than in 2017. At the same time, the American currency will still rise in price. By the end of the year, it can grow up to 72 soms.

«This is caused by the fact that the dollar’s position on the world market is strengthening. Although the Russian and Kazakh crises have passed, sanctions against the Russian Federation persist. In 2018, they will only increase. Now the world is divided into two parts — the East and the West,» the expert said.

No matter how strange it may sound, the cold war begins. The situation develops like in the times of the USSR, and this will affect the economic relations, including the financial component.

Kubanychbek Idinov

Such factors do not depend on Kyrgyzstan. Therefore, the task of the National Bank of the Kyrgyz Republic now is to keep the floating dollar exchange rate like in 2016. The National Bank will need to help the national currency, to launch some dollars on the market to restrain the sharp increase in the rate in order the well-being of the population not to worsen.

Let’s see what the Federal Reserve System will say

As for the external factors, Iskender Sharsheev is sure that the U.S. Federal Reserve System will most influence the dollar rather than sanctions. Now everyone is waiting for the speech of the new head of the Federal Reserve System, Jerome Powell, about the strategy of action in 2018: will it be a policy of quantitative easing or strengthening.

«Accordingly, in the first case, the dollar will become cheaper, and in the second case — on the contrary. In addition, everything depends on whether exports will grow in Kyrgyzstan. If we start exporting more goods, the number of dollars in the country will increase, and the U.S. currency will become cheaper. If not, then we should wait for the appreciation, because Kyrgyzstan is an import-dependent country. And the dollar will «leap» seasonally: rise in the beginning, and fall — in the end,» Iskender Sharsheev believes.

Jerome Powell hinted that, most likely, the mitigation of rates for the U.S. mortgage market would be limited, so the dollar would remain at about the same level as it is now.

According to the results of the survey by Reuters agency, the tax reform in the U.S. will have undetermined consequences for the U.S. currency. For this reason, the forecasts for dollar have become more moderate.

«As for the impact of Donald Trump’s approved tax reform on the dollar, analysis shows that at best, in the short term, there will be a small positive economic impact that could help to keep the weakening trend of the dollar against currencies observed in most G10 countries in 2017» said BBVA strategist Roberto Cobo Garcia.

Most of the analysts agree that in 2018 we should wait for a significant strengthening not of the U.S. dollar, but of euro.