National currency rate in Azerbaijan: is the stability sustainable?

National currency rate in Azerbaijan: is the stability sustainable?

Plummeting oil prices since the third quarter of 2014 have shaped new market conditions for the national currency of Azerbaijan. For the first time after the global financial crisis of 2008, the national currency has encountered serious challenges. The Central Bank attempted to preserve the stability of manat exchange rate at the expense of spending currency reserves. Although intervention operations have been initiated since August 2014, only 0.2 billion US dollars in total were spent in September, October and November for this purpose. However, intervention spending has rapidly increased reaching 1.2 billion US dollars in December 2014. During the following 2 months, the Central Bank was forced to take intervention measures of 1.08 and 1.68 billion US dollars respectively. As a result, currency reserves decreased to 11 billion dollars accounting for a 26.6% reduction within 3 months. One of the reasons for large-scale interventions was the society’s perception that devaluation was unavoidable, which thus increased the demand for foreign currency…

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