Why is the Uzbek Soum losing some altitude in early 2026?

CAUCASUS / CENTRAL ASIA - In Brief 10 Feb 2026 by Ivan Tchakarov

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While I am on topic (Uzbekistan is gingerly breaking away from the twin-deficit curse), I offer my pithy thoughts on the early-year softening of the UZS since I have been prompted by client questions.  The 2025 unusual strengthening of regional currencies (vs the US$) figured prominently in my writings last year and, as recently as mid-year, I advanced my theory/conjecture that the phenomenon, in turn, can be most usefully and simply linked to the RUB behavior (read strengthening vs US$). In Sep I declared that, for the most part, the currency appreciation binge is over, and that we should brace ourselves for a gradual normalization/stabilization of regional currency behavior. This has been more evident in the case of the more flexible Central Asian currencies (UZS and TJS) and less so in the case of the South Caucasus, where there have been important idiosyncrasies related to geopolitics (expectations of an imminent Armenia-Azerbaijan peace deal and record-high FX inflows and FX reserves in Georgia). As fas as the soum is concerned, the fundamental trajectory for the UZS should still be considered one of weakening given the still large, if declining, twin deficits. The 7% appreciation last year was driven by what I dubbed "a rare confluence of favorable external conditions". In that sense, what we are now seeing should hardly come as a surprise.The early 2026 normalization is likely driven by a combination of supply and demand considerations and structural economic pressures in the context of the new non-interventionist official exchange-rate stance. The latter relates to the intentionally introduced higher two-sided exchange-rate volatility (percent daily FX change),...