Manat streghens position
By Fatma Babayeva
The Central Bank of Azerbaijan (CBA) has recently reported about a slight increase in its foreign exchange reserves.
The forex increased by $39.5 million (0.98 percent) up to $4.065.8 billion in March 2016 compared to February, while the CBA's foreign exchange reserves decreased by $5.406.3 billion (by 2.3 times) compared to March 2015.
Earlier this week, the Bank resumed the purchase of U.S. dollars and bought $400,000 at currency auctions.
The CBA has carried out the USD purchase through an auction for the first time since May- June 2015. Following the devaluation of the manat, the Central Bank implemented only dollar intervention, except the mentioned period.
"Under the conditions of de-dollarization due to the fact that supply has recently exceeded demand, the rate of national currency started to consolidate against the dollar," the Central Bank said. "The need in the manat intervention emerged in order to limit short-term rate fluctuations in the foreign exchange market."
The government of Azerbaijan has begun to take measures to improve the liquidity of the national currency since March, as Natig Amirov, Azerbaijani presidential aide on economic reforms, promised earlier this year. These efforts are aimed to restore the activity of the manat and strengthen the exchange rate of the national currency.
The official rate of the Azerbaijani manat against the US dollar\ strengthened by 2.38 percent since the beginning of the year (based on the course for April 1 at the level of 1, 5238 manat/dollar), and by 7.4 percent over the last 20 days. The maximum recorded rate was 1, 6456 manat /dollar on March 11, and the minimum was 1, 5238 manat/dollar on April 1 rate established after the devaluation happened in December.
As the exchange rate of the national currency also depends on the volume of imports, the government has given a start to the reforms to form internal markets to reduce dependence on imported goods. The State Custom Service also applied reduction in custom duties and taxes on imported raw materials to stimulate domestic production.
The main directions for the further development of the national economy will be spelled out in the road map, which preparation started on March 16 on the basis of the presidential orders.
Zakir Nuriyev, the chairman of the Rabitabank Supervisory Board noted that local banks’ interest in USD decreased. That’s why, the dollar sales through auctions of the Central Bank declined sharply from February 2016. If in January for each auction banks bought an average of $144.56 million, the same index for March was 48.23 million (decrease by almost three times).
The dollar retreated globally after Federal Reserve chairwoman Janet Yellen set a decidedly cautious tone about the health of the US economy at the Economic Club of New York on March 29. In her speech, Yellen repeatedly expressed concern about raising interest rates, global economic risks and inflation which caused dollar to lose value.
In this context, experts believe dollar will continue to fall against the yen and euro, and weakening dollar suggests a continuation of the manat’s appreciation.
Moreover, depreciation of the euro against dollar is also inevitable in case if UK leaves the European Union. Analysts from Merrill Lynch banking company expect weakening of the euro on the eve of the referendum over Britain's membership of the EU, which will take place on June 23.
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