Azerbaijanis rush to convert dollars into manats after burst of appreciation

By bne IntelliNews February 10, 2017

The unexpected appreciation of the Azerbaijani manat in February has sent banks into a dollar-selling frenzy, sources in Baku have informed bne IntelliNews. In the past week, the manat has appreciated by 9.9% against the dollar, in contrast to its 13% depreciation in 2016 and 8.4% depreciation in January.

It is unclear how the manat, which was ostensibly floated in January and is currently trading freely, could have appreciated so much so quickly. Experts interviewed by Turan news agency point to the fact that the appreciation is speculative. Furthermore, sources have informed bne IntelliNews that lenders expect the currency to return to its gradual depreciation.

The central bank decided to drop the manat's peg to the dollar in February 2015, after spending 70% of its gross international reserves, or $11bn, on unsuccessful attempts at bolstering the currency. Between February 2015 and January 2017, the manat was maintained through a controlled flotation. However, in January, the regulator announced that it would allow the markets to decide the currency's value.

Azerbaijan's sovereign wealth fund Sofaz has been helping the central bank to meet demand for foreign currency from lenders - and thus restore confidence in the manat - since January 2016. The fund spent over $5bn on biweekly foreign currency auctions in 2016, and will continue to participate in them this year.

The manat's depreciation in 2015-2016 resulted in double-digit inflation for consumer products, which Baku has pledged it will seek to contain to single digits in 2017. In December alone, the prices of foodstuffs increased by 21% y/y.

Since early 2015, many Azerbaijanis have converted their savings into dollars. The rate of dollarisation of deposits is believed to exceed 80%, and that of loans 60%. If the appreciation continues, Azerbaijanis will likely rush to convert their savings back into the local currency.

Related Articles

Azerbaijani firms linked to political elites missing from tax registry, investigation reveals

A Radio Free Europe/ Radio Europe (RFE/RL) investigation revealed on March 24 that some 29 companies with ties to Azerbaijani President Ilham Aliyev, his family and the families of other government ... more

Bombardier's Swedish branch embroiled in corruption scandal related to Azerbaijani contract

The Swedish branch of Canadian aerospace multinational Bombardier is suspected of bribing its way into a $350mn contract with the government of Azerbaijan, a new investigation reveals. According ... more

Trump Org's Azerbaijan deal could open it up to prosecution, claims New Yorker

The Trump Organisation could be liable for prosecution under the Foreign Corrupt Practices Act (FCPA) for its business ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss