Neighbouring China devalued its yuan last week, causing a rout in many other emerging market currencies.
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Energy-rich Kazakhstan announced Thursday it was abandoning its currency band for a free-floating exchange rate, in a move that triggered a 23-percent fall in the value of the tenge against the US dollar. Central bank representatives weren’t available to comment when contacted by Bloomberg. Kazakhstan has also suffered from oil’s 22 percent retreat in the past two months, especially since its northern neighbor and trading partner Russia is allowing the ruble to track crude’s drop. “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 don’t want to have a financial stability impact”, he said. “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”.
While the bank’s gross reserves have stayed little changed at $29 billion this year through July, assets of the Kazakh National Oil Fund are down 7.3 percent to $68 billion in the period, central bank data show. ArcelorMittal’s local unit proposed a “significant reduction” in worker salaries due to a surge in steel imports, Chief Executive Officer Vijay Mahadevan said Aug. 7.
“The current corridor was established based on oil prices in the range of $55-60 per barrel, but the price is $48 [per barrel of Brent crude oil]”, Khudaibergenov pointed out, saying that as a result, the segment of Kazakhstan’s business sector that was pushing for a sharp devaluation would get what they wished for.
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Devaluations Demetrios Efstathiou of ICBC Standard Bank said he expected a further 5-6 per cent devaluation of the tenge by the end of the year, but even this would not be sufficient.
