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CBA decreases currency intervention

17 May 2011 13:41 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA-Economics. Central Bank of Azerbaijan has realized the exchange rate policy within the new operation mechanism and extension of supply channels in currency market, CBAâ€™s Monetary Policy Review on first quarter of 2011 reported.

According to review, CBA has started to realize the monetary policy in targeting frame of USD/AZN bilateral currency within the corridor, since early 2011. The decision on switch to new operation frame was adopted on the basis of diagnostics of tactics of exchange rate policy in Azerbaijan. Analyze shows that, targeting of USD/AZN bilateral currency is more advisable than targeting of value of bicurrency basket. This mechanism creates opportunities for CBA to switch to free-floating exchange regime.

Currency market has operated in almost self-regulating regime, during the first quarter. CBAâ€™s sterilization operations in currency market made $ 156 mln. For comparison note that, CBAâ€™s currency intervention to the market made $ 1.385 bln, last year. In total, exchange rate of manta has gained 0.65% strength against USD, in first quarter of 2011. Stability of exchange rate of national currency has influence the stability of macroeconomy and financial sector positively.

The nominal exchange rate of manta gained more strength than other countriesâ€™ currencies, while it went down in comparison to currencies of some trade partner countries. Dynamics of nominal bilateral exchange rate of manta has also influenced the changing of real bilateral rates. In January-March, both real and nominal manats went down compared to several countries (Eurozone, Russia, Georgia). Real manta went up compared to currencies of Great Britain, Kazakhstan, Japan, Israel, China, and South Korea, while nominal manta rose.

Nominal effective rate on non-oil sector (on total trade turnover) decreased 2.2% during the same period. Differ between Azerbaijanâ€™s inflation and partner countriesâ€™ inflation has influenced the real effective rate 1.5 percentage points-positively.