Azeri cenbank warns lenders as frenzy grips forex market

28.05.2020 17:56

Azerbaijan's central bank warned lenders on Friday against charging more than 1.055 manats to the dollar to ease frenzy on the currency market, a highly placed central bank source said, citing a document sent to banks.

Lenders ignoring the recommendation will be punished, the source told Reuters.

Azerbaijan is one of several former Soviet republics that have been forced to devalue their currencies following a plunge in oil prices and Russia's rouble.

The currency of another Caspian state, Kazakhstan's tenge, lost more than a quarter of its value on Thursday after the central bank ditched the tenge's trading band. Analysts said the move could increase pressure on the manat.

"A state of frenzy has arisen in the population of Azerbaijan against the backdrop of economic processes in neighbouring countries," the central bank source said. "In some foreign exchange offices, the dollar rate reaches 1.070 manats."

"To eliminate the frenzy on the currency market, the central bank has warned commercial banks. Banks were recommended to set the exchange rate for dollar sales at up to 1.055 manats," the source said.

The Azeri central bank declined official comment.

Azerbaijan devalued the manat by 33.5 percent versus the dollar and 30 percent against the euro in February. It earlier abandoned the manat's dollar peg and adopted a dollar-euro basket to manage the exchange rate.

Oil and gas account for 95 percent of Azeri exports and 75 percent of government revenues, meaning the Caspian republic is particularly vulnerable to the collapse in global oil prices since last summer.

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