11:34 / 09.12.2020
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Central Bank to increase exchange rate flexibility to internal and external shocks

The Central Bank of Uzbekistan plans to implement a number of measures to further improve the domestic foreign exchange market. 

Effective implementation of measures in this direction, according to the regulator, will increase the flexibility of the exchange rate to internal and external shocks. 

As a result, in the face of external risks, the exchange rate will absorb the impact of shocks (risk absorber), in connection with which its role as an automatic stabilizer will increase.

The Central Bank plans to move from the current fixing method to the continuous auction method – matching when determining the exchange rate. Currently, foreign exchange trading in the domestic foreign exchange market of Uzbekistan is carried out using the “fixing” method. Most developing countries, as well as all countries that have switched to inflation targeting, bid on the basis of continuous auctions (“matching”). 

“When using the continuous auction method, foreign exchange trading in the domestic foreign exchange market will last longer, buyers and sellers will trade at different rates on mutually agreed orders, as a result of which the role of market participants in determining the exchange rate will increase,” the Central Bank said. 

The Central Bank will carry out its interventions as one of the market participants. This method will make it possible to more widely implement market principles in the formation of the exchange rate, ensuring its formation entirely on the basis of supply and demand, and also increase its flexibility to changes in macroeconomic conditions.

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