Azerbaijan’s manat in Top 10 expensive currencies in world

/By AzerNews/

By Gulgiz Dadashova

Downward trend in oil prices continued inflicting losses to economies as the U.S. crude production is increasing and OPEC refuses to to cut production despite oil prices have slumped almost 50 percent compared to 2013.

Experts warn that prices may drop to as low as $30 a barrel, which will surely have a bad effect on world currencies. This is especially felt in regard to the “storms” in the Russian ruble rates, cheapening euro and Swiss currencies.

Standard & Poor’s, which cut Russia credit rating to junk for first time in a decade, has put Russia on par with Bulgaria and Indonesia with a negative outlook. Russia’s local currency ratings were reduced to BBB-, the lowest investment grade.

The ruble tumbled 6.6 percent on Monday to close at a record-low 68.7990 per dollar. The dollar-denominated RTS Index sank 4.8 percent for the sharpest slide in a month, while the Market Vectors Russia ETF dropped 7.4 percent on the same day to close at $14.78, Bloomberg reports.

Russia’s ongoing economic troubles have negatively affected its allies, mainly the ones tied with strong economic relations, which resulted in severe devaluation of a number of national currencies against the USD. The Russian roble depreciated by 80 percent, Kazakh tenge 19 percent, Turkmen manat 22 percent, Belarusian rouble 17 percent, Ukraine’s hryvnia 90 percent, and the Turkish lira 8 percent.

The same could be said about Armenian dram and Georgian lari, though rates of these currencies float freer, than Kazakhstan’s tenge. The analysts expect that they will continue declining in addition to the bond markets in these countries.

Meanwhile, the Central Bank of Azerbaijan didn’t allow the same scenario in regard to the national currency manat, keeping the economy stable amid the slowing the economic growth and slumping crude prices across the globe.

The Bank made $1.270 billion worth of purchase interventions over 11 months of 2014 to prevent sharp appreciation of the exchange rate of manat against the USD given prevalence of supply over demand in the FX market.

The CBA reported that the stable exchange rate of manat is the critical policy priority this year as well, noting that the stable exchange rate will anchor macroeconomic stability in 2015.

The country was able to keep the manat stable even during the 2008 global financial crisis, and seems to stand on this position under today’s circumstances.

The CBA reported that currently the national currency is the third most valuable currency in the world. The Kuwaiti dinar is most expensive currency against Azerbaijan’s manat with the exchange rate of 2.65 AZN to KWD. The most invaluable currency is Iranian rial with the exchange rate of 0.0029 AZN to IRR.

International rating agencies newly found the Azerbaijani manat the most stable and reliable currency in the CIS, Eastern Europe and in resource-rich countries, according to the CBA.

Although, the economy of Azerbaijan is energy oriented, experts underscore that continuing oil price decline and slump of Russian ruble exchange rate will not lead to devaluation of Azerbaijani manat.

The country is among the biggest oil exporters among the former Soviet republics, but the characteristic of Azerbaijan’s dependence on the oil revenues is very different from for example the situation in Kazakhstan.

The fall in oil prices was a warning to Azerbaijan that dependence on oil should be reduced, and developing other sectors of the economy, such as high technology, agriculture, industry, tourism, transport and others should be a priority for Azerbaijan.

Azerbaijan has enjoyed more reliable balance as one of the fastest growing economies in the world during the past decade. The country also pursues a different exchange policy