Finance

Home page

Finance

Central Bank: Switching to bi-currency basket leads to purposeful impact opportunities on multilateral exchange rate of manat against al currencies

27 May 2015 11:40 (UTC +04:00)

Baku. Yegane Lachinzade - APA-Economics. In the first quarter, Cental Bank of Azerbaijan conducted its monetary policy in the condition of significant increase of demand for foreign currency, said the Central Bank in its monetary policy review for January-March.

According to review, psychological impact of sharp price decline of the energy carriers in the global commodity market, as well as devaluation inclination in our partner countries led to increase of demand for foreign currencies, especially USD. Increase of demand for foreign currencies was observed in both segments of domestic currency market – cash and non-cash currency markets.

Volume of the currency market rose 2.6 times in the reporting period. 91% of operations were carried out with USD, 9% with other currencies. The operations with USD rose 2.3 times, with Euro – 2.4 times.

Taking into account the situation in the currency market, exchange rate of USD against manat made AZN 1.05 under the decision of the Central Bank of Azerbaijan dated to February 21, 2015. The decision was passed in order to create extra stimulus for economic diversification, strengthen its competitiveness and export potential, provide strategic durability of balance of payment and international payment ability of the country. On the eve of this decision, rise of manat against partner countries’ currencies reached its peak level.

The main point of the basket mechanism is that the change in Euro/USD is distributed between USD/AZN and Euro/AZN. At the same time, depending on situation in the currency market, inflation, financial stability, the value of the basket is also regulated. In other word, the basket mechanism allows to reflect exchange rate of Euro/USD and situation of balance of payment in the exchange rate. The advantage of aimed basket, of which value is aimed, is that this mechanism leads to purposeful impact opportunities on the multilateral exchange rate of manat against all currencies.

This also increases impact of Central Bank n money supply and interest rates by providing formation of exchange rate on the basis of market factors.

Interferes of the Central Bank of Azerbaijan in the currency market are carried out within the interference corridor. Currently, the market subjects are adapting to the new exchange rate.