Kazakhstan opts for floating exchange rate for its currency

The official tenge rate tumbled by 26.2 percent to 255.26 per dollar on the Kazakhstan Stock Exchange in response to the policy shift. “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”. Kazakhstan has also suffered from oil’s 22 percent retreat in the past two months, especially since its northern neighbor and trading partner Russian Federation is allowing the ruble to track crude’s drop.

Central Asia’s biggest crude exporter is contending with sliding oil prices and weakening economic growth in China and Russian Federation, its top trading partners.

“They don’t want to have a financial stability impact”, he said. Bank representatives weren’t available to comment when contacted by Bloomberg.

Benchmark Brent crude is trading at just under $50 per barrel and the US Energy Information Administration (EIA) said last week prices will average less than $60 per barrel throughout 2016.

Economists are predicting there are more losses in store.

The US dollar, as well as the Euro, are floating currencies.

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.

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

The overvalued tenge has led to a surge in Russian steel imports and forced ArcelorMittal’s local unit to make a “significant reduction” in workers salaries, Chief Executive Officer Vijay Mahadevan said August 7.

“The National Bank will not intervene in the formation of the market level of the tenge exchange rate”, he said. “He offered a dollar for sale at 197 tenge”, said multinational foreign exchange company the Alpari Group Senior Analyst Anna Bodrov, according to the Tengrinews report.