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Kazakhstan National Bank starts pegging tenge to fx basket

02 september 2013, 19:01
0
©REUTERS
©REUTERS
Starting from today, September 2, Kazakhstan National Bank switches to pegging tenge away from US dollar and to a foreign currency basket, Interfax-Kazakhstan reports citing the Bank’s chairman Gregory Marchenko.

The new system has replaced the managed float system that used dollar as its reference currency in Kazakhstan.

“The basket of foreign currencies is introduced for change the operational focus of the currency policy: instead of pegging to US dollar, the National Bank will follow the dynamics of three currencies: US Dollar, Euro and Russian Ruble,” he told the journalists on Tuesday last week in Almaty. This is done to harness "speculative moods," he said.

The initial rate of the Tenge to the fx basket will be set to 113.7 tenge, Marchenko said. He did not rule out that Chinese Yuan could be included into the basket at a later date.

The focus on dollar will not be really gone, however, it will only be diluted. Dollar will have the greatest weight in the fx basket.

The foreign currency basket is structured as follows:
- US dollar -- 70 percent,
- Euro -- 20 percent,
- Russian Ruble -- 10 percent.

Russia is using a similar system for its national currency. Its basket is made of US dollar and Euro. This allows Russia to make interventions more smoothly without having to defend levels of its currency. Many analysis believe that Kazakhstan has done this in Russia's footsteps.

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