Naubet Bisenov in Almaty -
The National Bank of Kazakhstan, the country's central bank, spent $144mn to prop up the tenge on September 16, less than a month after it announced that it would allow the currency to float freely.
The Kazakh national currency is continuing to weaken against the dollar, having lost nearly 12% between September 10 and September 14. On September 15, the tenge lost another 1.3% and settled at KZT282.10 to the dollar. According to data from the Kazakhstan Stock Exchange, the tenge closed at KZT284.60 against the dollar on September 16, touching highs of KZT300 in intraday trading. The total volume of trade reached $378.7mn against $141.6mn on September 15 and $149.6mn on September 14.
“In connection with the increasing volatility of the exchange rate of the tenge caused by speculative operations by currency market players in conditions of the lack of objective and significant changes in fundamental macroeconomic factors, the National Bank of the Republic of Kazakhstan decided to carry out currency interventions to stabilise the situation on the domestic currency market from September 16,” the bank said in a statement. “The volume of currency interventions by the National Bank stood at $144mn on September 16, 2015.”
Researchers at the Almaty-based Halyk Finance investment bank explain that the tenge started depreciating sharply because it was relatively overvalued against the Russian ruble, the currency of Kazakhstan’s major trading partner. On September 13 the exchange rate of the tenge against the ruble reached KZT4.11, the closest to the five-year average of KZT4.61 to the ruble. “The weak tenge compared to the ruble encourages import from the neighbouring country, exerting pressure on the tenge’s exchange rate via trade channels,” analysts Bakytzhan Koshchanov and Sabina Amangeldy said in a note to investors.
However, the government believes that the tenge’s exchange rate against the ruble will not reach the previous levels of 5-to-1 established before the ruble started devaluing in mid-2013. The government reasons that devaluation and inflationary pressures in Russia are developing faster than in Kazakhstan. “The annual rate of inflation reached 22-24% in Russia […], whereas inflation stood at 3.9% in our country in the first six months of 2015, which means we were in absolutely different economic realities,” Deputy National Economy Minister Timur Zhaksylykov said.
The high volatility on the Kazakh currency market has also forced the National Bank to point fingers at suspected culprits. On September 16 it started disclosing information on how much foreign currency commercial banks bought or sold.
When it announced the abolition of a trading corridor for the tenge and a switch to inflation targeting, the government and National Bank said that authorities would give up the practice of foreign currency interventions and that the exchange rate would be set by “fundamental internal and external macroeconomic factors”. At the same time, the National Bank reserved the right to intervene in the currency market to “ensure the stability of the country’s financial system”.
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