The exchange rate of the tugrug against the US dollar has been steadily decreasing, with the exchange rate at 2,396 MNT against one USD as of February 20.

The appreciation of the tugrug has been in large part thanks to a depreciation of the dollar on the global forex market. Many of the major world currencies rose on average two percent versus the dollar last week with the Japanese yen appreciating to 105.55 JPY, its biggest weekly gain since July 2017.

In November 2016, the tugrug depreciated to its worst levels, reaching 2,600 MNT for one USD. As a result of the extended fund facility implemented with IMF and the Monetary Policy Committee of the central bank lowering the policy interest rate from 14 percent to 12 percent, the exchange rate reached 2,353 MNT versus the dollar.

Since June, Mongolia’s economy recovered further and the foreign exchange reserve surpassed three billion USD. The exchange rate is heavily influenced by a country’s foreign exchange reserves.

Despite conventional wisdom that a higher yield on US bonds appreciates the dollar, the opposite has been observed.

As the dollar continues its slide to its weakest level in years against the major global currencies, some global economists have suggested that the US government is deliberately depreciating the US dollar to boost the economy. The fact that US President Donald Trump said on several occasions in 2017 that he thought the dollar was too strong and wouldn’t mind if it lost some of its value adds fuel to the fire. In 2017, the US dollar declined almost 10 percent.

The tugrug was already expected to appreciate in 2018 due to an improving Mongolian economy. If the dollar depreciates further and the United States Federal Reserve is slow or unwilling to take countermeasures, the tugrug could potentially appreciate even further.


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