Tenge Sinks to Record as Tax Support Ebbs, Companies Buy Dollars

  • Kazakhtan's currency extends month-to-date depreciation
  • Companies expect the tenge rout to persist, analysts say

Kazakhstan’s tenge slid to a record low as companies bought more dollars after winding down tax payments that spurred the currency’s rally late last month in the wake of the switch to a free-floating exchange rate.

The currency of Central Asia’s biggest energy producer slumped 4.7 percent to 263.50 against the greenback as of 5:18 p.m. in Almaty, taking its decline in September to 8.7 percent. That level is about 6.29 tenge higher than the record intraday low reached on Aug. 20, when policy makers abandoned interventions to maintain currency reserves amid a rout in commodity prices.

Companies are buying dollars as they “expect the tenge to weaken further,” Damir Seisebayev, the head of research at Private Asset Management in Almaty, said on Friday. Despite the losses, the tenge is still overvalued when compared to the Russian ruble, he said.

Devaluation Pressure

Kazakh policy makers had previously resisted devaluation pressure as oil tumbled in its worst decline since the global crisis in 2008. The commodity accounts for more than 13 percent of Kazakhstan’s economic output and 60 percent of its exports, according to Standard & Poor’s.

The tenge surged the most in 20 years on Aug. 24, trimming a monthly decline, amid speculation companies and individuals were selling dollars that they had hoarded following the Kazakh currency’s move to a free float.

Local companies accumulated the currency for tax payments, according to Sabit Khakimzhanov, head of research at Halyk Finance, a unit of the country’s second-largest lender by assets.

Now that the tax payments are over and the government is transferring cash to local government accounts and to pay civil servants’ salaries, there are more tenge in circulation, which is pushing the price down, he said yesterday.

Kazakhstan’s central bank set a new benchmark interest rate on Sept. 2 as part of its plans to develop policy tools to control inflation, which the government aims to keep under 10 percent this year.

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