(Adds details and context)
TASHKENT/DUSHANBE, Aug 20 (Reuters) – Uzbekistan allowed its sum currency to float freely and neighbouring Tajikistan allowed its somoni to weaken on Tuesday after the Russian rouble sank.
Both central Asian countries’ economies depend to a large extent on remittances from migrant labourers working in Russia, making them sensitive to changes in the rouble, which hit a six-month low on Monday.
The sum’s official rate fell 3.4% to 9.384 per dollar after Uzbekistan’s central bank said it was scrapping a 5% limit on daily exchange rate movements and would allow them to be determined purely by supply and demand.
The official rate of the Tajik somoni fell 2.7% against the dollar on Tuesday to 9.70 per dollar, the biggest adjustment in more than two years, which the Tajik central bank said was due to pressure from the market.
The International Monetary Fund describes Tajikistan’s exchange rate regime as a “stabilised arrangement”, where the central bank’s official rate may differ from the rate on the interbank market.
The said in a statement that it had recorded a sharp decline in remittances as well as an increase in the trade deficit.
The Uzbek central bank said it noted increased volatility and would closely monitor the market and take measures to soften external shocks while working with the government to contain fiscal and monetary expansion.
Despite the pressure, it said in a statement that it would press ahead with further liberalisation and allow banks to sell cash foreign currency at exchange kiosks, which could previously only conduct transactions using bank cards.
The Uzbek sum has weakened 11.1% against the dollar so far this year as imports continued to grow faster than exports – many Uzbek companies, effectively barred from buying foreign currency until the 2017 reform, are now importing equipment to modernise.
The currencies of two other Central Asian nations, Kazakhstan and Kyrgyzstan, have also weakened over the last two months, broadly in line with the rouble. (Reporting by Nazarali Pirnazarov in Dushanbe and and Mukhammadsharif Mamatkulov in Tashkent; Writing by Olzhas Auyezov; Editing by Subhranshu Sahu and Kevin Liffey)