A central bank official told Reuters the basket would probably be 30 percent denominated in euros and 70 percent in dollars, in line with Azerbaijan's exports, and that the corridor would be set at a level to allow the bank to intervene when it sees fit.

"It will be a steady process. If we free the manat at once, prices could jump. One manat will cost 1 euro this year," said the official, who did not wish to be named since he was not authorized to talk to the media.

Azerbaijan has been less affected than other former Soviet states by an economic crisis in neighboring Russia, but its economy is highly dependent on oil, leaving it exposed to price swings on global energy markets.

The Azeri bank has spent heavily in recent months to defend the manat, which has been effectively pegged to the U.S. dollar at just over 0.78 manat per dollar since mid-2011, eating into its foreign-currency reserves.

Vakhid Akhmedov, a lawmaker from the country's ruling party, told Reuters that the decision to abandon the peg was expected.

"The central bank cannot sell $1 billion every month to support the manat. It will also allow to stimulate domestic exports," Akhmedov said.

Analysts say the South Caucasus republic's 4.4 percent economic growth target for this year is at risk because it envisages oil at $90 a barrel, whereas Brent crude is currently trading near $60 a barrel.

Oil and gas account for 95 percent of the country's exports and 75 percent of government revenues.