Australian Dollar Accounts for 3% of Kazakh Currency Reserves

Kazakhstan holds 3 percent of its $30.1 billion of foreign exchange reserves in Australian dollars, the oil-rich nation’s central bank said, underscoring demand for the currency as countries diversify their assets.

The central Asian nation also has 3 percent of its $55.4 billion National Oil Fund in the so-called Aussie, the National Bank of Kazakhstan said in a written response to questions from Bloomberg News. Fifty-four percent of the oil fund is held in U.S. dollars and 18 percent in euros, while the foreign exchange reserves comprise 43 percent U.S. dollars, 16 percent euros and 16 percent in gold, it said.

“Considering that the historical interest rates in Japan - - Asia’s main market -- are near zero, it was decided to invest in the Australian market,” the National Bank said in the statement. Australia “differs by having much higher interest rates, while still having similarly high levels of liquidity,” it said.

Australia is one of only seven nations with stable AAA credit scores from all three main ratings companies. Even after the Reserve Bank of Australia reduced its key interest rate by 1.5 percentage points since November to 3.25 percent, it retains the highest benchmark borrowing cost among major developed nations.

The so-called Aussie, the world’s fifth-most traded currency, was at $1.0222 as of 5:19 p.m. in Sydney, about 36 percent higher than its average since exchange-rate controls were scrapped in 1983.

Kashagan Oilfield

Kazakhstan is the biggest oil producer in central Asia, after more than doubling output over the past decade to 1.8 million barrels a day in 2011, BP Plc (BP/)’s latest annual statistical review shows. Exxon Mobil Corp. and Royal Dutch Shell Plc (RDSA) are among the partners developing the Kashagan oilfield in the country’s sector of the Caspian Sea, touted as the world’s biggest discovery in four decades when found and due to start commercial production next year.

The Kazakh central bank’s website shows the National Oil Fund and foreign exchange holdings contain a total of $85.5 billion, indicating Kazakhstan may hold about A$2.5 billion.

Kazakhstan, Brazil, Russia, Germany, South Korea, Poland, Sweden and Switzerland are among 15 nations that hold the Australian currency, according to an RBA spreadsheet created in July and other papers released Sept. 17 under a Freedom of Information Act request by Bloomberg News. Among eight possible holders are Iceland, Indonesia, Jordan, Malaysia and Singapore, they showed.

Bank Indonesia Deputy Governor Hartadi Sarwono said last month the central bank is interested in diversifying reserves and is considering currencies including the Australian dollar.

‘Optimum Return’

“Bank Indonesia continue to make an effort to diversify forex reserve placement to get optimum return,” Sarwono said in a mobile-phone text message in Jakarta on Sept. 20. “We are looking at countries like Australia” that have good returns with low risk.

The same day, Bank of Thailand’s then Deputy Governor Suchada Kirakul told reporters that the central bank has held Australian dollars in its foreign reserve for many years as a way to diversify risk. “Still the amount is not much and we have limit for that,” she said.

Singapore and Malaysia declined to comment on their reserves when contacted by Bloomberg News following the release of the RBA documents last month.

Resilience in the Australian currency, supported by its increasing use in foreign-exchange reserves amid global financial strains, deprives Australian exporters of the competitiveness provided from exchange-rate depreciation should economic growth slow. Declines in the Aussie in 2008, 2001 and 1998 helped Australia maintain its recession-free record since the early 1990s.

RBA Deputy Governor Philip Lowe said this week the exchange rate is probably “going to remain high, relative to historical averages” and this will be a challenge for the community, business and government.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net; Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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