TOPIC OF THE WEEK: CCA currency appreciation has come to an end

CAUCASUS / CENTRAL ASIA - Report 26 Sep 2025 by Ivan Tchakarov

In mid-June I asked how long the CCA currency strength (vs the US$) would continue. My key thesis was that, beyond the myriad relevant macro stats, this would critically depend on the RUB. In short, I argued that the ongoing strengthening of local currencies vs the US$ would only have legs until the RUB started losing value against the US$. Furthermore, I argued that "there are already signs that RUB's run against the US$ may be coming to an end", which would elicit a corresponding reaction from CCA currencies. This has now, for all practical purposes, materialized.

Indeed, RUB strength vs the US$ peaked in Jun/Jul, and the RUB started to soften in Aug. As a result, CCA currencies also saw their strongest depreciation vs the RUB in mid-Jul and, consequently, most CCA currencies (the UZS being the only exception) experienced their most appreciated position vs the US$ around Aug. In line with that RUB-based argument, which hinges on the crucial trade and financial linkages between Russia and the CCA economies, the CCA currency appreciation (vs the US$) has now come to an end. As the RUB continues to gradually lose value (vs the US$), the CCA will be following suit, including because of how policy-makers in the region tend to think about exchange rates and their effect on the domestic economies.

In addition to these broader considerations, I go through the idiosyncrasies of the individual currencies and conclude that regional exchange rates, including the Uzbekistani sum, are set to experience a reversal of fortune in the coming weeks and months.

Now read on...

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