Financial Markets
The financial market is a system where financial resources circulate among financial market participants. The main components of Armenia's financial market are the Money Market, Foreign Exchange Market, and Securities Market.
Money Market: The money market is the segment of the financial market where short-term loans, borrowings, investments, and trading of highly liquid instruments take place. The main function of the money market is to provide a liquidity management platform for short-term financial needs. Participants in the money market include central and commercial banks, brokerage and dealer companies, and other financial and credit institutions.
The Central Bank's participation in this market is shaped by the inflation targeting strategy, which is effectively implemented by guiding money market interest rates.
Key Data:
Operations carried out by the Central Bank
Regulation of the Central Bank operations
Short-term liquidity management
Foreign Exchange Market: The foreign exchange market is a system where market participants carry out foreign currency purchase and sale transactions. The Central Bank of Armenia maintains a free-floating exchange rate policy, which is consistent with the principles of liberalized capital account transactions and independent monetary policy implementation. However, the Central Bank of Armenia may occasionally intervene in the foreign exchange market to prevent potential panic situations and significant fluctuations.
Exchange Rates: To provide market participants with summary information reflecting market developments, the Central Bank of Armenia calculates and publishes average exchange rates of foreign currencies formed in currency markets and exchange rates of the Armenian dram against precious metals. The average exchange rate of the Armenian dram against the US dollar is calculated based on purchase and sale transactions carried out in the Armenian foreign exchange market. Average exchange rates for other currencies and precious metals are calculated as cross-rates.
Key Data:
Foreign Exchange Derivatives Market:
Securities Market: The securities market is a system where market participants carry out the issuance of new securities, their primary placement, and secondary market circulation. The main part of Armenia's securities market is the government bond market. The Armenian government bond market is a specialized segment of the financial market where the government issues bonds to finance state projects. In Armenia, government bonds are placed through auctions held at the Armenian Stock Exchange OJSC.
For liquidity management purposes, the Central Bank of Armenia may buy and sell government bonds in the financial market. Armenian government (treasury) bonds and non-government bonds (corporate securities) meeting specified criteria are also acceptable instruments for repo/reverse repo operations with the Central Bank of Armenia.
The Central Bank of Armenia calculates and publishes the yield curve of Armenian government bonds and government bond indices every working day.