“Low oil prices mean low oil revenues, which is the major source for foreign exchange supply in Azerbaijan,” Tembon said. “In addition, regional currencies such as Russian ruble, Kazakh tenge and Turkish lira have been depreciating strongly in the past year. This forces market participants to sell off their manats.”
“Furthermore, because of manat’s appreciation in real terms, competitiveness of Azerbaijan goods in the regional markets becomes challenging,” she said. “All these factors trigger the authorities to react to the external developments and adjust the manat exchange rate accordingly. Consequently, the interplay of oil price, regional currencies and the Fed’s interest rate decisions will create an environment in which the Azerbaijani authorities will shape their responses.”
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