Afghanistan backs national currency

Many Afghans are still heavily dependent on aid

By Kate Clark BBC correspondent in Kabul

The central bank in Afghanistan has intervened to support the national currency, buying $500,000 worth of afghanis from the Kabul money market.

Large amounts of afghanis were sold at the end of last week as people speculated that the currency would strengthen.

The speculation actually caused the afghani to devalue.

The currency fell from a rate of 31,000 to the dollar to 39,000 to the dollar over two days of trading.

The currency's fall shocked the markets.

Everyone had expected the Afghan currency to gain as national hopes rose with the return of the former king.

Money dealers said many cashed in stockpiled banknotes in the hope of making some money.

Intervention

The Afghan central bank's intervention scarcely affected the currency.

Even so the governor of the Afghan central bank remained undaunted.

It was just the first intervention, he said.

There are no commercial banks in Afghanistan so money has to be paid to the big dealers in Kabul's money market.

On Sunday alone 17bn afghanis were bought by the central bank.

"Can you imagine how much time it takes just counting that out?" said the governor.