Azerbaijan sold six times the amount of dollars on Thursday that’s usually offered by its sovereign wealth fund, intensifying efforts to meet rising demand for the U.S. currency after most banks halted their foreign exchange.
The central bank, together with the fund known as Sofaz, sold a combined $300 million, which still wasn’t enough to meet demand by lenders that totaled $402.6 million, according to a statement. Sofaz normally provides $50 million twice a week. Lenders bid for $588 million at the previous auction held two days ago, according to the central bank, which until Thursday hasn’t sold foreign currency since July.
The former Soviet Union’s third-largest crude exporter is in the grip of a fresh currency crisis after the manat lost about half its value against the dollar in two devaluations last year. Most banks halted foreign-currency sales in the past several weeks as demand rose and the manat continued to depreciate.
“The increase in dollar offer may help ensure stability on the market only temporarily,” Samir Aliyev, an analyst at the Center for Support to Economic Initiatives, a research group based in Baku, said by phone. “The central bank will need to weaken the manat further.”
The manat suffered the world’s biggest drop last year, and it’s down 2.5 percent against the dollar in the past month, worse than the currencies of all ex-Soviet nations except Ukraine’s hryvnia. The Azeri currency traded 2.2 percent stronger as of 6 p.m. in Baku.
The central bank burned through more than two-thirds of its reserves last year before shifting to a managed floating exchange rate in December as oil prices collapsed. Moody’s Investors Service said last week Azerbaijan may be forced to reconsider some form of capital controls as the former Soviet Union’s biggest currency crisis shows no sign of letting up.