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Nazrin Abdul

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Azerbaijan’s manat is navigating a landscape increasingly defined by robust capital inflows and a positive balance of payments, setting the stage for potential currency appreciation against the US dollar. Recent data for the first half of 2025 reveals a consistent trend of net gains in both direct foreign investments and remittance inflows, complemented by a favorable trade balance. These economic signals suggest that the manat may experience underlying strength, independent of broader geopolitical or energy market considerations.

During the first six months of 2025, Azerbaijan attracted a total of $3.22 billion in foreign direct investment (FDI). In comparison, outbound direct investments from Azerbaijan totaled approximately $1.35 billion, resulting in a net inflow of $1.87 billion. This net positive in FDI is a crucial driver of demand for the local currency, as foreign investors convert dollars into manats to fund projects, purchase assets, and engage in economic activity within the country. The magnitude of these inflows reflects sustained international confidence in Azerbaijan’s investment landscape, even when evaluated in isolation from external macroeconomic conditions.

Remittance flows further reinforce the positive currency outlook. In the same six-month period, Azerbaijan received $533.9 million in remittances from abroad, while only $238.2 million left the country through outbound transfers. The net inflow of $295.7 million, representing more than twice the outbound flow, signals that households and businesses are receiving substantial dollar inflows. These transfers not only contribute directly to national liquidity but also indirectly support the manat by increasing domestic availability of foreign currency, reducing pressure on the exchange rate.

Trade figures for the first eight months of 2025 add another layer of support for the manat. Azerbaijan’s foreign trade turnover reached $32 billion, with exports totaling $17 billion and imports accounting for $15 billion. The resulting positive trade balance of $2 billion underscores that the country is generating more foreign currency through exports than it is spending on imports. Such a surplus further enhances the domestic supply of dollars, reinforcing the potential for manat appreciation in currency markets.

Additionally, the broader international monetary environment may provide favorable conditions for the manat. In September 2025, the US Federal Reserve lowered interest rates, which typically reduces demand for the US dollar in global markets. Lowered US rates can make emerging market currencies more attractive to investors seeking yield and stability, potentially enhancing the appeal of the manat relative to the dollar. While the effect of Fed policy on any single currency is not deterministic, the timing of the rate cuts coinciding with Azerbaijan’s strong net inflows suggests an alignment of supportive factors.

Taken together, the combination of strong net FDI, robust remittance inflows, a positive trade balance, and a global environment of easing dollar interest rates forms a compelling narrative for the manat’s potential strengthening. The underlying pattern is clear: more dollars are entering the Azerbaijani economy than leaving it. Each component, investment, remittance, and trade, contributes independently to the local currency’s stability, while collectively reinforcing the trend toward appreciation.

This convergence of factors paints a picture of an economy benefiting from balanced capital inflows and sustained foreign engagement. While market sentiment and short-term fluctuations can never be fully predicted, the structural dynamics suggest that the manat’s value relative to the dollar is underpinned by solid economic fundamentals. Investors, businesses, and households transacting in foreign exchange may therefore anticipate a period of relative stability, if not gradual appreciation, supported by these net inflows.

Azerbaijan’s currency outlook is shaped decisively by the consistent inflow of foreign capital, positive net remittances, and a favorable trade balance, all set against a backdrop of declining US dollar interest rates. These factors collectively point toward an environment in which the manat has the potential to strengthen in value, reflecting the country’s positive balance-of-payments position and growing economic engagement with global markets. For observers of emerging market currencies, Azerbaijan offers a clear example of how concentrated capital inflows and a surplus in trade and remittances can act as stabilizing forces, even in a landscape of global financial volatility.