Causes of tenge-dollar exchange rate spike unclear

On 19 August tenge-dollar exchange rate suddenly spiked and in several Kazakhstani banks the rate exceeded 194 tenge per 1 US dollar . Many exchange offices also set their exchange rates well above 190 tenge per 1 US dollar. The National Bank of Kazakhstan has not yet commented on the situation.

Head of the analytical department of Halyk Finance Sabit Khakimzhanov believes that the change in the exchange rate of tenge was not accidental, but a deliberate execution of an order to devalue the Kazakh currency, a Tengrinews correspondent reports.

On August 19 the tenge weakened by about 3.5 percent. The fall occurred in the last 13 minutes of the morning session of the Kazakhstan Stock Exchange (KASE). The last and maximum price at which the dollar was traded on the Kazakhstan Stock Exchange (KASE) today equaled to 195 tenge. 

“Insignificant trading volume and the fact that the weakening of the tenge occurred at the end of the session leaves only a tiny chance that it was an error in the work of the exchange desk,” he said. The lack of intervention of the National Bank during these 13 minutes also points to the fact that it was not a mistake, he said.

The expert added, however, that to make a difference for Kazakhstan's economy the exchange rate had to be set to at least 230 tenge per dollar. "3.5 percent devaluation is not enough to solve the problem of the overpriced tenge, but it is enough to trigger a recession in demand for the tenge," he said.

Meanwhile, the exchange rate indicated on the website of the National Bank remains at 188.35 tenge per dollar.

The National Bank of Kazakhstan last changed the corridor - that the tenge is pegged to in a so called managed float - on 15 July 2015 setting the permissible range to 170-198 tenge per dollar. Moreover, Kairat Kelimbetov, the central bank governor, promised back then that the exchange rate would not rise above 190 tenge in the nearest quarter. 

Today, the head of the National Bank met with the President of Kazakhstan to discuss the situation. Everyone was eager for a statement related to the tenge spike after the meeting, but it turned out the meeting mostly addressed general economic issues.

Nazarbayev ordered the government and the governor of the National Bank to urgently work out some economic and monetary policies to address the complex economic situation, according to the presidential press-service.

During the meeting in Akorda Kelimbetov said that the central bank of Kazakhstan was considering a transition to inflation targeting together with the International Monetary Fund.

"There are deadlines in mind, but if the situation persists, we will speed up its implementation and will come forward with a proposal after consulting with the government," Kelimbetov said.

The President of Kazakhstan instructed the government to prepare a plan of measures to promote economic growth in the medium term. Also, the government and the National Bank have been entrusted to urgently work out economic and monetary policies that would work well in the current environment.

“The current crisis is sectoral, affecting virtually all the industrial enterprises in Kazakhstan. We haven’t faced such a situation before, so it requires a very different approach. I am confident that we will resolve the situation, just as we did in the past," Nazarbayev said.

The government meeting did not specifically addressed the unexpected fluctuation of the tenge exchange rate. The National Bank has not issued any statements on the situation either. So far only some of its branch offices broke the silence. 

Exceeding the pegged corridor ceiling set by the National Bank (198 tenge per dollar) constitutes a violation of guidelines, it will be followed by sanctions and fines, reminded the head of the Kostanai brach of the National Bank Miras Zhumashev, Nasha Gazeta reported. He added that there were no plans to expand the pegged corridor in the near future.

According to Zhumashev, the exchange rate spiked sharply at around 10:30 on 19 August, when the tenge-dollar rate reached 196-198 tenge for reasons unknown to him.

"Kostanai offices of the banks said that they had orders from their head offices. Maybe the banks have received the information from outside and started fearing something. Perhaps this was due to the fact that the Chinese yuan has fallen. However, the cause has not been announced yet,” Zhumashev said.

East Kazakhstan branch of the National Bank did not rule out that the dollar would decline in the near future, YK-News.kz reports. Head of the branch Marat Barlybayev said that the official exchange rate had not been changed by the National Bank and that the spike happened unexpectedly.

"Let’s hope that people do not panic given their experience with previous currency jumps (19% devaluation of the tenge in February 2014 and 22% devaluation in February 2009) and will not start buying up dollars. After all, many people remember that in February 2014, when the dollar suddenly rose from 145 to 185 tenge, at the peak time exchange offices were selling dollars even for 200 tenge. But then the rate fell by 17-20 tenge. I would not rule out that this time the dollar will fall somewhat, and the overall situation on the currency market will stabilize in the near future," he said.

By Dinara Urazova, editing by Tatyana Kuzmina