Galymzhan Aitkazin, the AERC senior analyst, notes that since the year beginning the national currency has lost 13-14% in value against the dollar, while the ruble has lost more than 20%. Moreover, the tenge is also part of a basket of emerging market currencies, some of which follow a similar floating exchange rate.
Aytkazin told about measures that can help the tenge to strengthen. According to him, a possible scenario for this could be the emergence of certainty and the final stabilization of the situation in the energy markets, in particular, oil and gas. Another option could be the adoption of a new package of economic support in the US, which would allow the dollar to weaken against other currencies and, accordingly, strengthen the tenge.
“A change or improvement in the external economic background for the trading partner countries of Kazakhstan is another factor. In particular, the Central Bank of Russia may raise the key rate or increase the volume of currency sales from the National Wealth Fund (NWF). In turn, any actions of the National Bank aimed at supporting the tenge may become internal factors for Kazakhstan. However, in my opinion, the tenge does not need any help in the current situation. It should be noted as well that the present exchange rate of the national currency is also supported by the base rate of the regulator, which has kept it when the majority of the world's central banks have been actively reducing and demanded the same inside the country. As a result, the current rate makes it possible to level out external risks to one degree or another and maintain a balance between market factors that can have a negative impact due to the deterioration of the situation in external markets. Conversion of funds from the National Fund for the budget can also become an additional measure to support the tenge. In general, the situation in the foreign exchange market is developing within the framework of the floating exchange rate regime that makes allowance for global and regional market factors,” he said.
However, Andrei Kochetkov, the Otkritie Broker analyst, believes that the tendency for the ruble to weaken is coming to an end.
“If there was a deep crisis in Russia, then such values of the euro and dollar could be explained. However, oil prices are at a relatively high level, and geopolitical risks are greatly exaggerated. Therefore, by the end of the year, we expect the strengthening of the Russian currency, which will become even more accentuated in 2021,” he predicts.
Kochetkov has also emphasized that geopolitical risks relate to the tenge to a lesser extent but nevertheless the currency of Kazakhstan is subject to the influence of global trends. “So far, we do not see the potential for a further strong fall in the tenge limiting the possible movement to a 5% limit. If the situation in the markets improves, the rate may return under the 400 tenge mark for $1 in the future three to six months. The strengthening of the Kazakh currency will be influenced by such factors as the release of vaccines against COVID-19 in mass use, recovery of demand for commodities and improvement of business activity in countries that are Kazakhstan's main trading partners,” he explained.
Meanwhile, an economist Vladislav Turkin noted that the strengthening of the tenge could be affected by the rise in oil prices. An increase in the base rate, further strengthening of currency restrictions, limited economic activity as a result of the introduction of new quarantine measures and a shock reduction in imports can also be effective.
“The exchange rate of the tenge cannot be considered fully balanced before the ruble and oil weakening, as under the quarantine measures and the coronavirus crisis, economic activity is in a depressed state, which accordingly reduces activity of the population and companies in the foreign exchange market by causing a course deviation from its "natural" state. This means that recovery of economic activity coupled with various stimulating measures (budget, monetary policy), one should expect a smooth shift in the direction of weakening," he summed up.
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