World Economy

Azerbaijan Moves to Float Forex Rate

Azerbaijan Moves to Float Forex RateAzerbaijan Moves to Float Forex Rate

Azerbaijan moved to a floating exchange rate, the latest crude producer to abandon a currency peg after oil prices slumped to the lowest in 11 years, letting the manat tumble by a third.

The central bank set the manat loose as of Monday to “protect the country’s foreign exchange reserves at the crucial level to ensure the competitiveness of the economy” amid a barrage of “intensifying external economic shocks,” the regulator said in a statement, Bloomberg reported.

Azerbaijan has burned through more than half of its central bank reserves to defend the currency after the manat was allowed to weaken about 25% in February. The stockpile was at $6.8 billion at the end of last month, down from more than $15 billion a year earlier. Countries in Russia’s orbit–including Kazakhstan, which set its currency loose in August–are finding it increasingly difficult to resist the gravity of the larger country’s recession.

The manat, which had one annual drop against the dollar in the past 12 years, was at 1.5576 to the dollar, down 33% in the interbank market, according to data compiled by Bloomberg. In September, Azeri central bank Governor Elman Rustamov said the foreign currency market is stable and there was no need for another devaluation of the manat, according to an interview with the ANS television channel.

Azerbaijan’s former Soviet allies Russia and Kazakhstan have moved to floating currency rates in the past year. The price of crude, the Caspian Sea nation’s biggest export, has fallen almost 70% since June 2014 and is trading at its lowest since July 2004.