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Eurasia
September 14, 2018 www.intellinews.com I Page 16
Ruble ramifications send Kazakh tenge to brink of all-time low
Kanat Shaku in Almaty
Kazakhstan’s national currency hit KZT380.93 against the dollar on September 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 new all-time weakness versus the US dollar. The tenge has largely fluctuated around KZT340 throughout most of the year, but it acquired fresh downward momentum in July which accelerated in August and in September to date.
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.
Some Kazakh analysts argued earlier in 2018 that the tenge was “overvalued” and that its “real value” stands at around KZT420 to the dollar.
Another major effect on the tenge probably comes from the demoralised Kazakh population’s general distrust of the country’s regulator — most of this stems from devaluations of the currency prior to the central bank adopting the free- floating exchange rate in 2016. Kazakhstan has experienced no less than six such devaluations or “devalvatsiyas” — a word that has come to signify the rapid and sudden weakening of the tenge
The tenge's plunge against the dollar has been mainly ascribed to the Kazakhstani currency's strong links to the under-pressure Russian ruble.
rather than a general term for loss of value over time — since gaining independence in 1991.
The adoption of the free-float currency system essentially tied the tenge directly 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 hurried along by Kazakh citizens,
who have grown accustomed to their national currency crashing abruptly to the detriment
of the general population. The attitude taken 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 in their role.
Russian news outlets last year alleged that Kazakh currency speculators en masse were taking advantage of high rates on tenge deposits by obtaining loans in rubles and dollars — often from neighbouring countries — before exchanging them into tenge sums and depositing those at high rates, hoping to profit off the difference. That, in turn, led to excess tenge in circulation, which forced a gradual devaluation of the currency, the reports posited.