Kazakh Tenge Slumps to Record Low as Crude Oil Extends Retreat

  • Kazakh tenge drops 5.7% against the dollar, most in month
  • Oil-price decline is leading to dollar purchases, analyst says

Kazakhstan’s tenge, the world’s worst-performing currency this year, dropped to its weakest on record as slumping oil prices spurred a flight to dollars.

The currency of Central Asia’s biggest energy exporter slumped 5.7 percent to 334.03 against the dollar today in Almaty, the steepest decline since September, according to data compiled by Bloomberg. The tenge had traded within a range of 300 and 317 per dollar since Nov. 6 after central bank Governor Daniyar Akishev allowed the currency to depreciate about 9 percent in the week following his Nov. 2 appointment.

“The tenge is in free float and the worsening external economic conditions lead to increased demand for dollars from businesses and the population,” said Damir Seisebayev, head of research at Private Asset Management in Almaty. “In the near term, oil will probably continue to fall and that will affect the tenge.”

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Kazakhstan has stepped up measures to limit currency speculation from Dec. 15 as the government braces for further declines in oil and assesses its plans if the price drops to $30 a barrel from a projected $40 for 2016. Crude, which fell to its lowest since 2008 last week, accounts for more than 50 percent of the country’s budget revenue, according to Standard & Poors.

The MiG chain of 25 currency-exchange kiosks in Almaty was offering to buy $1 for 336 tenge on Monday. The interbank repurchase rate jumped 2,474 basis points to 38.21 percent and the cost for one-day dollar-tenge currency swaps increased 619 basis points to 32.66 percent on the Kazakhstan stock exchange, according to the bourse’s website.

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. The central bank said last month it would protect foreign currency reserves by cutting the amount of dollars its sells to support the tenge.

The currency has been “de-facto” pegged to 307-308 tenge per dollar since Akishev’s appointment on Nov. 2, Tatiana Orlova, a senior economist at Royal Bank of Scotland Group Plc in London, wrote in a report on Dec. 7. Kazakhstan may repeg the currency if Brent crude drops to $30 or below and an adjustment to 340-350 “would be likely,” she said.

Brent for January settlement traded down 86 cents, or 2.3 percent, at $37.07 a barrel on the London-based ICE Futures Europe exchange on Monday.

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