Currencies Of Russia And Kazakhstan Fall With Price Of Oil

China last week devalued its yuan currency affecting natural resource exporters across the world.

Kazakhstan’s tenge plunged a record 23 per cent after the country relinquished control of its exchange rate, becoming the latest emerging market to abandon efforts to prop up its currency before the US raises interest rates.

Kazakhstan’s central bank had devalued the tenge three times since 1999 – most recently by 19 percent in February last year.

Russia 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. “In anticipation of higher US interest rates, some emerging-market countries are opting to let their currencies weaken to stimulate exports and avoid massive intervention”.

“They realize that they cannot stand in front of a train”, Timothy Ash, the head of Europe, Mideast and Africa credit strategy at Nomura Holdings Inc.in London, said by e- mail.

The Kazakh exchange rate now trades just one unit away from the upper limit of the central bank’s trading band, which Governor Kairat Kelimbetov raised in July.

Faced with pressure from sliding oil prices and sanctions over the conflict in Ukraine, Russia stopped managing its currency in November 2014, and the ruble has fallen 45 percent versus the dollar in the past 12 months, compared with a 7.6 percent weakening for the tenge. “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”.

The government may trim its budget spending due to lean revenues this year, Masimov said.

He also said the central bank would no longer intervene massively to influence the rate but added: “The National Bank reserves the right to intervene when there is a threat to financial and price stability”.

Imports shank by 20 percent in the same period, he said.