Azerbaijan's central bank foreign currency reserves rose 4.6% month-on-month to $13.8bn as of July 31, the Central Bank of Azerbaijan (CBA) said.

The reserves have grown 19.6% since the start of the year and 23% over the past 12 months, adding $2.6bn in the first half alone, CBA governor Taleh Kazimov told a press conference on July 31 on interest rate corridor parameters.

Kazimov said high foreign currency supply on the market had allowed the CBA to carry out purchase-side interventions this year, a trend he expects to continue through the end of 2026. "We forecast the central bank will intervene in the currency market by the end of this year as well," he said.

Supply has outstripped demand in both cash and non-cash segments since the start of the year, according to Kazimov. Currency exchange offices bought $482mn more foreign cash from clients than they sold in January-June. Dollarisation of resident individuals' deposits fell 3.8 percentage points over the past 12 months to 25.6%.

Reduced demand for foreign currency also showed up in auction results. Of 34 currency auctions scheduled since April 1, 23 did not take place, Kazimov said. "We put $70mn up for sale at auction, but there was no buyer. This is the first time such a situation has been observed since 2016-2017. In May alone, no currency auctions were held at all," he said.

Kazimov attributed this largely to the interbank currency trading system operating on the Bloomberg platform since 2022. "Banks are now meeting their currency needs among themselves. When one bank has demand and another has sufficient reserves, they transact directly with each other. This removes the need for central bank currency auctions," he said.

Separately, Azerbaijan's monetary base stood at AZN23.9bn ($14bn) as of August 1, down 1.8% (AZN438.6mn) from July 1 but up 6.55% since the start of the year and 12.7% over the past 12 months, the CBA said.

The monetary base expanded 5.8% in the first quarter to AZN23.8bn, driven mainly by changes in government account balances, according to the CBA's May 2026 Monetary Policy Review. Cash in circulation grew 3.3% and banks' correspondent account balances rose 22.4% in the same period.

The manat money multiplier stood at 1.7 as of end-March, the ratio of broad money supply in manat (M2) to the manat monetary base. Broad money supply (M3) rose 0.2% to AZN49.9bn in the first quarter, while manat-denominated M2 fell 1% to AZN40bn.

Within the money aggregates, cash in circulation (M0) grew 2.3% and term deposits rose 3.6% in the first quarter, while demand deposits fell 7.8%. Demand deposits' share of M2 fell 2.4 percentage points to 32.8%, while term deposits' share rose 0.9 percentage points to 21.3%. Cash's share of M2 stood at 45.9% at end-March.

Foreign currency deposits accounted for 31.6% of the total deposit portfolio and 20% of M3 at end-March, the CBA said.