Analysts on fair market exchange rate of USD to tenge

With the current prices for oil, the fair market exchange rate of the USD to the tenge, Kazakhstan’s national currency, would be around 200-235 tenge for USD 1, Ms. Anna Bodrova, a senior analyst with Alpary consultancy, said in an interview for Tengrinews.kz.

 August 20 the country’s Central Bank renounced its policy of the set currency band.  “The fair exchange rate of the US Dollar would be around 200-235 tenge for USD 1, with the actual figure standing at 250 plus tenge for USD 1 reflecting the current hyperbolized emotions of the market and investors fuelled by the unexpectedness of the new monetary policy”, Ms. Bodrova said.

According to her, there were two reasons to let the tenge float freely.  “The first is that prices for commodities have dropped by 37% since May 2015. The country’s economy relying on commodities is not ensured against the falling demand for crude. The country’s National Bank does have substantial reserves accumulated in the period of much higher prices for crude. However, in the last 1.5 years the National Bank has been resorting to currency interventions to bolster the tenge and claiming all possible risks the tenge might face were a thing of the past. The second reason is the long-awaited shift to inflation targeting”, she said, adding that although the Government is anticipating the inflation rate will be reduced, the actual inflation rate figure is highly likely to surge as of the end of August.

The analyst believes that “the weaker tenge will enable not to cut down on the budget expenses, which means that all the social programs and infrastructure projects will be further implemented”, she said.

At the evening session August 20 the US Dollar was traded at 256.26 tenge for USD 1. In their turn, banks sold US Dollars at 259 tenge for USD 1. The decision to renounce the set currency band was announced in the first half of the day August 20. “The new exchange rate dependent on supply and demand will put in place conditions for the economy to recover, galvanizing lending and investment operations and enabling to create jobs and reduce the inflation rate down to 3-4%”, the country’s PM Karim Massimov told journalists yesterday.