- Tenge weakens as much as 5.3% to 303.70 versus dollar
- Kazakhstan replaced head of central bank at start of week
Kazakhstan’s central bank postponed Friday’s interest-rates meeting and said it would protect foreign currency reserves by cutting the amount of dollars it sells to support the tenge, which weakened to a record low today.
Policy makers have decided to “minimize” the central bank’s presence in the currency market effective Nov. 5, according to a statement on the regulator’s website. “This is in line with the National Bank’s previously announced free-floating exchange rate and inflation-targeting policy.”
Daniyar Akishev was appointed on Monday by Kazakh President Nursultan Nazarbayev to replace Kairat Kelimbetov at the helm of the central bank and restore trust in the currency. Kelimbetov set the tenge free in August following devaluations by Russia and China, Kazakhstan’s neighbors and two biggest trading partners. An emerging market rout forced him to return to interventions the next month as the tenge became the world’s most volatile currency.
The central bank spent $5 billion from its reserves and oil fund since the sales resumed and the regulator accounts for 60 percent of trading volumes, according to the central bank’s statement. A new date for a rate decision will be announced, the regulator said, without providing further details.
“The Kazakh central bank needs time to see the market’s reaction to its decision to cut interventions before deciding whether to conduct an emergency interest-rate hike or any other measures to support the tenge,” Dmitri Petrov, an analyst at Nomura International Plc in London, said in e-mailed comments.
The central bank raised its benchmark interest rate to 16 percent on Oct. 2 in a bid to tame the currency’s swings, four weeks after introducing it at the level of 12 percent.
The tenge slumped as much as 5.3 percent to the weakest on record on Thursday, the worst performer among currencies globally, and closed down 4 percent at 299.50 versus the dollar. A five percent decline does not present a threat to financial stability, the central bank said in the statement.
Akishev, 39, must stem a record exodus from tenge savings in banks after the switch to the free float devalued the currency and left 76 percent of all retail deposits denominated in foreign currencies, according to Moody’s Investors Service. The central bank announced plans on Oct. 15 to sell $3 billion from the nation’s National Oil Fund by the end of the month, prompting concern the tenge purchases would only put off a slump in the local currency.
“They stopped selling currency from the oil fund for the budget at a time when expectations for the currency to devalue are high,” said Dmitry Polevoy, ING chief economist in Moscow.