Tugrug continues to weaken against dollar and yuan

The government enforced several actions to maintain the value of the tugrug against foreign currencies as various socioeconomic issues emerge amid the COVID-19 pandemic...

The government enforced several actions to maintain the value of the tugrug against foreign currencies as various socioeconomic issues emerge amid the COVID-19 pandemic. However, the tugrug has further depreciated against the two main foreign currencies, the US dollar and yuan.

As of July 16, the official exchange rate of the US dollar against tugrug stood at 2,832.22 MNT, and the exchange rate of a yuan was 404.12 MNT.

Compared to the same period of last year, the tugrug has depreciated against US dollar by 172.72 MNT or 6.5 percent and against yuan by 17.81 MNT or 4.6 percent. Since January, the exchange rate of US dollar against tugrug increased from 2,734.33 MNT to 2,832.22 MNT, weakening against the dollar by 3.6 percent. Meanwhile, the tugrug saw 3 percent depreciation against the yuan in the last seven months.

The national foreign reserves reached 3.56 trillion MNT by the end of June, indicating 11 percent surge compared to the previous month but 13.3 percent decline year-on-year. By the end of May, savings held in foreign currencies amounted to 4 trillion MNT, up by 226.1 billion MNT compared to the previous month and by 1 trillion MNT compared to the same period of last year. Current accounts held in foreign currencies also saw year-on-year increase of 62.5 billion MNT, totaling 2.35 trillion MNT by May.

These factors are further weakening the tugrug and boosting dollarization, said President of Mongol Bank B.Lkhagvasuren. He projected some burden on the tugrug this year as the balance of payment is expected to face a deficit of 1 billion MNT by the end of the year.

Looking ahead, he added, “There is room for the economy to recover in the second half of 2020. In March, foreign trade had a deficit of over 40 percent, but by May, it reduced to 30 percent. From this perspective, the tugrug is relatively stable. Moreover, we’re not pending large debt repayment at the end of this year. The International Monetary Fund has agreed to finance more than 700 million USD as well.”

To safeguard the value of the tugrug, the government decided to conduct all transactions in the national currency and stop insuring savings held in foreign currencies and if insured, compensations will not be approved. Savings held in foreign currencies were also not included in the exemption of banking fees.