Forecast: US-dollar will continue to slump

Forecast: US-dollar will continue to slump
Report: The real effective exchange rate should be in the range of 85-95%

Baku. 21 February. REPORT.AZ/ Exchange rate of the US-dollar will continue to fall in Azerbaijan in near future.

Analytical Group of Report said that the reason for this is decline of the dollar in main trading partner countries - Turkey, Russia and China.Thus, decline of the dollar increased price of imported goods in dollar equivalent in ( as selling prices remained stable in local currency).This in turn is reflected in the domestic market prices. Increase in exchange rate of dollar in Azerbaijan lifts prices more in manat equivalent. This reduces the purchasing power of the population and leads to shortage of some goods.

Notably, if the real effective exchange rate of the Azerbaijani manat will stabilize at the level of 85-95% it is considered to be satisfactory.If the real effective exchange rate would be above this level, it would lead to the increase in imports, weakening of purchasing power and deficit in a number of goods. Notably, the real effective exchange rate measures the value of a currency against a basket of other currencies; it takes into account changes in relative prices and shows what can actually be bought.A decline in real effective exchange rate means depreciation of value of manat compared to the value of the currencies of trading partners.

Notably, in 2008-2015, the real effective exchange rate was 120-130% when dollar was weak and in January 2015, on the eve of the first devaluation amounted to 153.1%. In 2016, the real effective exchange rate was in the range of 87-92,8%. The minimal level of the real effective exchange rate of manat since 2000 year was in 2004 (74,2%).

Notably, the real effective exchange rate of manat by the end of 2016 was equal to 91.3%. Since the beginning of the year the figure may be reduced because of the decline in currencies of the trading partner countries. So, US-dollar rate this year in Turkey reduced by 8% from maximum level, 8% in Russia and1% in China. Depreciation of the dollar is important in Azerbaijan in order to prevent the process. Notably, even if the official exchange rate of the dollar falls by 9% from the maximum limit of 2017, selling price of dollar in banks decreased by 4%.

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