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bne October 2018 New Europe in Numbers I 69
Post Soviet nation currencies have varying degrees of exposure to the course of the Russian ruble. The Kazakh tenge is seen top left.
Ruble fallout sends Kazakh tenge to brink of all-time low
the country’s regulator – most of this stems from devaluations of the cur- rency prior to the central bank adopting the free-floating exchange rate in 2016. Kazakhstan has experienced no less than six such devaluations or “deval- vatsiyas” – a word that has come to signify the rapid and sudden weakening of the tenge rather than a general term for loss of value over time – since gain- ing independence in 1991.
The adoption of the free-float currency system essentially tied the tenge di- rectly to two primary factors – changes in world oil prices due to the country’s reliance on hydrocarbon exports and the rate of the Russian ruble. As seen from the recent downward trajectory of the tenge, growing oil prices have largely failed to counteract the ruble- dependency. Aivar Baikenov, director of the asset management department of Kazkommerts Securities, said last year that the tenge has a stronger correlation with the ruble than with oil prices. But this phenomenon is being intensified by the approach of Kazakh citizens.
Kazakhs have grown accustomed
to their national currency crashing abruptly to the detriment of the general population. The attitude taken
Kanat Shaku in Almaty
Kazakhstan’s national currency hit KZT380.93 against the dollar on Sep- tember 12, falling to a 31-month low. The all-time weakest tenge to the dollar rate of KZT382 occurred in early 2016, thus the currency is on the brink of suffering its weakest ever value versus the USD. The tenge has largely fluctu- ated around KZT340 throughout most of the year, but it acquired fresh downward momentum in July which accelerated
in August. To date, in September, there has been further devaluation.
The plunge has been mainly ascribed to the tenge’s strong links to the under-pressure Russian ruble. The tenge has lost 14.6% against the dollar in the year to date. Kazakh companies are buying dollars on fears that US sanctions against Russia are set to intensify. Kazakhstan and Russia
have close trade ties, where the latter approximately accounts for 35% of the ex-Soviet Central Asian nation’s trade.
Not everybody agrees with the sig- nificance to the currency of the trade correlation, however. Kazakh economist Petr Svoik argued earlier this year that
the tenge fluctuations follow the ruble exclusively due to perception effects rather than direct economic ties.
"The tenge is tied to the ruble politically. In general, the floating rate of the tenge
“The tenge has lost 14.6% against the dollar in the year to date”
in Kazakhstan is not an economic, but a political phenomenon,” Svoik told Zakon.kz news website in April. “Local banks react to geopolitical and eco- nomic events outside of Kazakhstan, and above all to events at the Moscow currency exchange and the Moscow trading platform.”
Some Kazakh analysts argued earlier in 2018 that the tenge was “overvalued” and that its “real value” stands
at around KZT420 to the dollar.
Demoralised population
Another major effect on the tenge probably comes from the demoralised Kazakh population’s general distrust of
towards the exchange rate, whenever it shows signs of weaknesses, spurs Kazakhs to attempt to outsmart or out-gamble the authorities, who are seen as malevolent.
The Kazakh central bank has more than enough funds to draw on to keep the currency more-or-less stable – Kazakhstan's international reserves were recorded at $87.7bn as of June. When all else fails, the bank is allowed to rely on the National Fund with assets worth $50bn-$60bn for conducting additional interventions. This time, it seems the Kazakh central bank has openly decided to let the tenge drop alongside the ruble.
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