Kazakh Central Bank Halts Easy Liquidity as Tenge Tumble Pauses

  • Some banks used funds to speculate most on tenge, Akishev says
  • Regulator sees currency consolidating with oil at $30-$40

Kazakhstan’s central bank said it acted to deprive lenders of liquidity for speculating against the tenge as the world’s second-worst performing currency halted its decline against the dollar.

“We’ve suspended our commitment to the unconditional provision of liquidity at rates close to the base rate” because lenders with speculative positions are the ones most often seeking money, central bank Governor Daniyar Akishev told reporters in Almaty Tuesday. “In these circumstances, I consider it fair for the central bank not to provide liquidity to those banks that have taken the most active speculative positions.”

Stabilization of money-market rates that almost doubled to an annual 330 percent on Monday, and rose to 390 percent on Tuesday, will take place when the tenge also reaches balance, Akishev said. A similar situation was observed in November when the currency stabilized at 307-308 per dollar and money-market rates declined to between 12 percent and 20 percent a year, he said.

The currency of Central Asia’s biggest energy exporter strengthened for a second day, by 1 percent to 336.5 per dollar in Almaty, its strongest growth since September, according to data compiled by Bloomberg. The tenge has tumbled 46 percent this year to record lows as slumping oil prices spurred a flight to dollars. It’s declined 18.6 percent since Akishev was appointed governor Nov. 2 in place of Kairat Kelimbetov and cut interventions to save reserves after Kazakhstan moved to a free float in August.

Rates, Risks

“It seems that high interest rates on the money market are doing their job, forcing lenders to sell dollars,” said Damir Seisebayev, head of research at Private Asset Management in Almaty. “As the rates are high, risks remain for borrowers to meet their obligations under repo transactions.”

The central bank sees the tenge stabilizing at about the rate of recent days with oil at $30 to $40 per barrel, Akishev said. The currency may rebalance if Russia’s ruble weakens 10 percent against the dollar and oil falls below $30, he said.

The regulator spent $17.4 billion from its reserves to support the tenge in the first 10 months of this year, compared to $22 billion in 2014, Akishev said. It bought $943 million since Nov. 5 and net purchases were $577 million in November, he said.

Currency Speculation

Kazakhstan has stepped up measures to limit currency speculation as the government braces for further declines in oil, which accounts for more than 50 percent of the country’s budget revenue according to Standard & Poors, and assesses its plans if the price drops to $30 a barrel from a projected $40 for 2016. Azerbaijan’s currency, the manat, declined by a third against the dollar on Monday after the Caspian Sea oil producer followed Kazakhstan in announcing a shift to a free float.

Kazakhstan, the largest oil producer among former Soviet republics after Russia, shifted to a floating exchange rate in August as tumbling crude prices and devaluations by Russia and China boosted the cost of defending the currency. Brent crude for February settlement traded at $36.51 per barrel at 10:46 a.m. in London on the ICE Futures Europe exchange, after declining 71 cents to $36.17 on Monday, its lowest intraday level since July 2004.

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