Kazakhstan Plans $3 Billion Currency Sales After Tenge Slide

  • Tenge strengthens for first time in five days against dollar
  • S&P says Kazakhstan faces `deteriorating' economic conditions

Kazakhstan will sell $3 billion from its National Oil Fund on the market by the end of the month, prompting concern the tenge purchases will only delay a slump in the local currency.

The oil fund needs tenge to finance economic programs, the central bank said in a statement on its website Thursday. Previously, the transactions didn’t affect the exchange rate because they were conducted between the fund and the central bank, without foreign currency entering the market. The tenge strengthened for the first time in five days against the dollar, adding 0.1 percent to 276.34 at the close in Almaty.

Central Asia’s biggest energy producer abandoned its managed exchange rate in August as concern about China’s slowdown hobbled oil prices. Policy makers resumed interventions in September after the tenge’s volatility surged to the highest in the world and the currency weakened to as low as 299.99. As of last week, the central bank had spent $1.7 billion to smooth the tenge’s moves.

“There’s no sense in making the tenge appreciate,” because it will encourage bets from speculators who see the gains as temporary, Olzhas Khudaibergenov, a former adviser to the governor and now director of Center of Macroeconomic Research, said by phone. “The tenge will strengthen in October and in November it will fall again” as the purchases cease, he said.

Kazakhstan faces “deteriorating economic conditions,” Standard and Poor’s said in a report today. The tenge is 34 percent weaker than it was a year ago, while oil prices are down 42 percent in the same period.

“Businesses are avoiding investing and are waiting for the tenge to weaken further,” Damir Seisebayev, director of research at Private Asset Management in Almaty, said by phone. “The most painful thing is not a tenge rate of 300 per dollar, but that there is no dedollarization.”

Before it's here, it's on the Bloomberg Terminal.