Money is weird. Specifically, the relationship between the US Dollar to AZN is one of the weirdest things in the global foreign exchange market right now. If you look at a chart of the Azerbaijani Manat over the last few years, you’ll notice something hauntingly flat. It looks like a heart rate monitor on a patient who has been dead for a decade. Since 2017, the rate has sat almost exactly at 1.70.
Most currencies breathe. They go up when a country exports more oil or down when a central bank fumbles an interest rate decision. Not the Manat.
If you're planning a trip to Baku or looking to move capital into the Caspian region, you have to understand that "market forces" don't really live here. The Central Bank of the Republic of Azerbaijan (CBAR) keeps the US Dollar to AZN on a very short leash. It’s a managed float that isn't actually floating. It’s basically a fixed peg in everything but name.
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The 1.70 Magic Number
Why 1.70? Honestly, it’s a psychological anchor. After the massive devaluations in 2015—when the Manat lost about half its value against the greenback almost overnight—the government decided stability was more important than flexibility. They saw what happens when a currency crashes. People panicked. Savings evaporated.
The CBAR manages this by selling dollars at bi-weekly auctions. The State Oil Fund of Azerbaijan (SOFAZ) provides the bulk of these dollars. Because Azerbaijan is so heavily reliant on oil and gas exports, they have a massive pile of foreign currency. They use that pile as a shield.
- Current official rate: 1.7000
- Historical volatility (post-2017): Near zero
- Black market presence: Minimal to non-existent currently, unlike the 2016 era
But here is the catch. Just because the rate is stable doesn't mean it’s "fair" in a traditional economic sense. When you trade the US Dollar to AZN, you are essentially betting on the continued health of the energy sector and the political will of the CBAR to keep burning through reserves to maintain that 1.70 line.
What Actually Moves the Needle?
Oil. It always comes back to oil. When Brent Crude is trading at $80 or $90 a barrel, Azerbaijan is flush with cash. The pressure to devalue the Manat vanishes. In fact, in those scenarios, the Manat actually looks "undervalued," but the government doesn't let it appreciate because that would hurt non-oil exports.
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They want a predictable environment.
However, if oil prices were to tank and stay below $40 for a long period, the conversation around the US Dollar to AZN would change instantly. We saw this in 2015. The central bank can only fight the market for so long before the cost of defending the peg becomes too high.
Realities for Travelers and Investors
If you are heading to Azerbaijan, don't expect to find a "better rate" at a shady booth in a back alley. Because the rate is so tightly controlled, the difference between the airport exchange and a bank in the city center is often negligible. It's usually a fraction of a percent.
You’ve got to be careful with credit cards, though. Even though the official rate is 1.70, your home bank might charge a "foreign transaction fee" or use a slightly different conversion methodology. Always pay in AZN if the card terminal asks. Let your own bank handle the math; the merchant's "dynamic currency conversion" is almost always a rip-off.
The Inflation Problem
Stability in the exchange rate doesn't mean prices don't change. Azerbaijan has struggled with double-digit inflation in recent years. This creates a weird paradox. The US Dollar to AZN stays at 1.70, but your dollar buys significantly less in Baku than it did three years ago because the local price of bread, tea, and rent has climbed.
Economists call this the "real effective exchange rate." While the nominal rate is frozen, the Manat is actually becoming more expensive in terms of purchasing power.
Why the Peg Might Break (Or Why It Won't)
There is a lot of chatter among regional analysts about a "correction." Some argue that the Manat is artificially strong. They point to the fact that neighboring currencies, like the Georgian Lari or the Turkish Lira, have been on a wild rollercoaster.
But Azerbaijan isn't Turkey.
The fiscal buffer in Baku is massive. SOFAZ holds tens of billions of dollars. They can afford to maintain the 1.70 peg for years, even during a downturn. It’s a political choice as much as a financial one. President Ilham Aliyev has frequently emphasized the importance of macroeconomic stability. In a country where the state dominates the economy, the state's preference for a steady exchange rate usually wins.
- Foreign Reserves: As long as they stay high, the peg is safe.
- Trade Balance: Azerbaijan consistently runs a surplus.
- Regional Conflict: Tensions in the South Caucasus can cause temporary jitters, but rarely move the official rate.
Smart Moves for Managing Manat
If you’re dealing with larger sums, say for business or real estate, you should probably look into hedging, though it's difficult with a currency that doesn't trade freely on global markets. Most local businesses still keep a portion of their "rainy day" funds in USD just in case the 2015 ghost returns.
Honestly, the best strategy for the US Dollar to AZN is to treat it like a fixed asset. Don't try to day-trade it. You'll lose money on the spread. Instead, focus on the timing of your conversions. If you're an expat getting paid in Dollars but living in Manats, you're currently in a bit of a squeeze because of that local inflation I mentioned.
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Practical Next Steps
- Monitor Oil Prices: If Brent Crude stays above $60, don't expect any movement in the exchange rate.
- Check CBAR Reports: The Central Bank of Azerbaijan publishes monthly monetary policy notes. They are dry, but they tell you if the bank is feeling "hawkish" or "dovish."
- Use Local Banks: For the best rates, use reputable institutions like International Bank of Azerbaijan (ABB) or Pasha Bank rather than hotel desks.
- Diversify: If you are holding large amounts of AZN, it’s standard practice in the region to keep a secondary account in USD or EUR to mitigate the risk of a sudden "overnight" policy shift.
The Manat is a controlled, deliberate, and somewhat artificial currency. It serves the purpose of national stability at the expense of market transparency. As long as the oil flows and the reserves stay fat, 1.70 is the number you’ll be seeing for the foreseeable future.
To manage your exposure effectively, keep your liquid AZN holdings to what you need for 3-6 months of operating expenses. For any long-term capital preservation, the historical trend suggests that holding a diversified basket of harder currencies remains the safer bet, despite the Manat's current visual stability. Keep an eye on the CBAR's foreign exchange reserve levels; any dip below $10 billion would be the first real signal that the 1.70 peg is under actual pressure.