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Forex Surplus Strengthens Currency in Azerbaijan

The Central Bank of Azerbaijan announced recently that with the country's balance of payments surplus, demand exceeds supply in the country's foreign exchange market, thereby strengthening the national currency.

As a result of the surplus, the CBA purchased from the foreign exchange market $1.3 billion in 2010, $4.1 billion in 2011, $1.5 billion in 2012, $2.4 billion in 2013 and $967 million in the first quarter of 2014, depositing the funds in its foreign exchange reserves.

Foreign exchange reserves increased by seven percent in the first half of this year, reaching $15.1 billion, which exceeds international standards of sufficiency.

The country's central bank provides quarterly monetary policy updates on its interventions in the foreign exchange market to stabilize the exchange rate of the manta—part of a sterilized currency intervention.

The bank said in purchasing excess foreign currency, central banks are able to prevent sharp depreciation of a foreign currency or appreciation of a national currency. Currencies are generally purchased when a country has a balance of payments surplus.

Source: CISTran Finance

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