Kazakh Tenge Gain May Not Slow Inflation, Central Bank Says

A stronger currency doesn’t necessarily help slow inflation in countries like Russia and Kazakhstan, according to Grigori Marchenko, governor of the National Bank of Kazakhstan.

“In Russia they’ve allowed the ruble to appreciate, while their inflation rate is still the same as Kazakhstan’s” and the tenge’s gains were one-sixth those of ruble, Marchenko said in response to questions from reporters in the financial capital of Almaty today.

Russian inflation slowed to 9.5 percent from a 15-month high of 9.6 percent in January as Bank Rossii allowed the ruble, which it manages by buying and selling foreign currency, to strengthen 7.8 percent against the dollar from the start of the year. The tenge, which is also controlled by policy makers, appreciated only 1.3 percent in the period as Kazakhstan’s inflation coooled to 8.6 percent in March from a 22-month high of 8.8 percent the previous month.

“Russia let the ruble strengthen significantly, but we didn’t,” Marchenko said today. “We’ll see what the consequences will be.”

The National Bank of Kazakhstan will be forced to allow the nation’s currency, the tenge, to strengthen 7.7 percent over the next year to bring down prices on imported goods, ING Groep NV said in an April 8 report. The regulator will favor currency gains over interest-rate increases to help tame price growth, Citigroup Inc. said March 1.

‘Comfort Level’

The tenge is a “managed” free float in that the central bank allows it to move until it surpasses a particular “comfort level” for the Kazakh economy, the National Bank said in an e-mailed statement on March 1. Last month the regulator abolished the corridor it had been using to control the tenge since a 20 percent devaluation in February, 2009.

The central bank has purchased about $700 million of foreign currency to moderate the tenge so far in April, boosting the country’s total international reserves to more than $70 billion, Marchenko said. “The situation calmed down on the whole,” he said.

The tenge was little changed at 145.4150 per dollar by 3:29 p.m. in Almaty, and the ruble was 0.3 percent down against the greenback at 28.3620 per dollar, according to prices compiled by Bloomberg.

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