Baku, Azerbaijan, Sept. 15
By Anvar Mammadov – Trend:
No sharp changes in the exchange rate of Azerbaijani manat to the US dollar are expected in the near future, John Hardy, head of foreign exchange strategy at Saxo Bank, told Trend Sept. 15.
A weaker US dollar and stable to slightly higher oil prices are positive factors for the manat, he said.
It appears that the exchange rate of Azerbaijani manat to the US dollar is being managed, so this may not mean any new movements in the currency for now, as the higher yield of Azerbaijan’s national currency could attract some deposits back into the manat, he added.
Speaking about the meeting of the US Federal Reserve System (Fed) and the expected decision regarding the key interest rate, Hardy noted that one shouldn’t expect the Fed to increase the interest rate.
“The Fed is not expected to raise rates as it is expected instead that the Fed will announce plans to slowly begin reducing its balance sheet by allowing some of its holdings to expire – with the preannounced plan of $10 billion per month – this will likely begin in October,” he said.
Given that US President Donald Trump has agreed with Democrats on a debt ceiling extension deal, there is nothing to suggest that the Fed won’t announce, he added.
“The Fed’s next move to begin quantitative tightening is largely priced into the market,” he noted.
What could provide more interest is that the Fed suggests that the growth trajectory will be increasingly cautious in the near term, for example due to the two hurricanes Harvey and Irma that recently struck the US, Hardy added.
This could see the market removing even the remaining little anticipation for a December key interest rate hike, he said.
This could see a bit more weakness of the US dollar, especially versus emerging market currencies, he said.
The weakness of the US dollar could cause some marginal strength in commodity prices, especially oil, Hardy noted.
Saxo Bank thinks oil prices are getting about as high as they are likely to get for now, given the supply and demand balance globally, so the bank is not expecting any dramatic new oil rally, he added.
After ending its policy meeting in July, the Fed decided to leave its key interest rate unchanged in a range of 1 percent to 1.25 percent after having raised rates twice this year in March and June.
