Kazakhstan floats tenge, currency tumbles

Kazakhstan has opted for the floating exchange rate for the tenge, its national currency.

In a statement on his Facebook page, Director of the Centre for Macroeconomic Research Olzhas Khudaibergenov, a former adviser to the head of the National Bank of Kazakhstan, said “Today at the KASE, the average rate of the tenge was 188.38 tenge per $1”.

The ruble’s slide led Kazakhstan to witness an influx of grain, metals, construction materials, oil products and coal from its northern neighbor due to the price differential, according to Kazakh business association Atameken.

Russian Federation is allowing the ruble to track the drop in crude, which has tumbled 58pc over the past year to $40.58 a barrel in New York.

That brings Kazakhstan’s policy more into line with Russian Federation, whose central bank floated the rouble late last year and announced a shift to an inflation-targeting regime, but still periodically reacts to bouts of rouble weakness.

On Wednesday, the tenge had rapidly neared the upper limit of its trading corridor of 170-198 per dollar, fuelling expectations of an imminent devaluation. “They have to find weaker currency levels but will have to avoid overshooting”.

The dual impact of China’s renminbi devaluation – and worries about the country’s slowdown – along with anticipation of a US rate rise is weighing on currencies in emerging markets, already feeling the pain of falling commodity prices. “This means that exchange rate changes may occur in the direction of easing or strengthening, which will be determined by the domestic currency market and global economic situation”. He said next year the cabinet would not borrow on foreign capital markets to bridge the fiscal gap. The decision was taken by the country’s Government in partnership with the national Bank, Tengrinews.kz reports.

“We think the worst times may yet come, and we will need the National Fund then”, he said.