Tag Archives: currency

Kazakh Central Bank picks new interest rate

SEPT. 2 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank picked the overnight repo rate as its benchmark interest rate and main tool for manipulating monetary policy, setting it at 12%.

The decision came two weeks after the Central Bank allowed the tenge to free float, abandoning the peg to the US dollar. The free-float pushed the value of the tenge down by 23%, the second devaluation in less than two years.

“This rate is aimed at directing nominal rates in the money market and will become a key instrument of the credit and monetary policy, in the new inflation-targeting regime,” the Central Bank said in a statement.

The tenge traded at around 240 to $1 immediately after the new interest rate was announced, having strengthened from 252 to $1 after the US dollar peg was ditched in August. By comparison, in February 2014, before the first devaluation, the tenge traded at 155 to $1.

Analysts welcomed the relatively high benchmark interest rate, saying that the tenge needed this level of support.

Sabit Khakimzhanov, head of research at Halyk Finance, said that the Central Bank may even need to increase this key interest rate by one percentage point to 13%.

“The interest rate in the money market is the only instrument left at the disposal of the NBK (National Bank of Kazakhstan) to manage inflation and the exchange rate,” he said.

“Only by keeping the rates credibly high, that is, at a level sufficiently high to enforce the necessary discipline and for a sufficiently long time. The interest rate corridor 12-14% meets these requirements.”

Other analysts said the high interest rate may encourage Kazakhs to keep their money in the bank.

“The high rate levels are clearly seen as securing the banking system from deposit outflows and anchoring inflation expectations,” Dmitry Polevoy, a Moscow-based economist at ING Groep NV, told Bloomberg News.

Previously the key interest rate had been the ineffective refinancing rate set at 5.5%.

Earlier this year the Kazakh government said that targeting inflation was going to be the main driver of its future economic policies.

The problem is that with the tenge devaluing and with oil prices remaining stubbornly low, the Kazakh government has already said that inflation is likely to climb above its 6-8% corridor target.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakh shares rally after devaluation

AUG. 20 2015 (The Conway Bulletin) – Shares in Kazakh copper miner KAZ Minerals, formerly called Kazakhmys, rose by 20% on the London stock exchange immediately after Kazakhstan’s government said that it would allow its tenge currency to free-float. The announcement knocked 23% off the value of the tenge, giving exporters a much needed boost.

ENDS

(News report from Issue No. 244, published on Aug. 21 2015)

Kazakhstan devalues the tenge by 23%

ALMATY/Kazakhstan, AUG. 21 2015 (The Conway Bulletin) — Kazakhstan gave up its defence of the tenge by ditching a peg to the US dollar which had cost it billions to enforce, a move that knocked 23% off the currency’s value .

Businesses, policy makers and analysts will now be watching for a subsequent rise in inflation, as well as possible social unrest, in Kazakhstan.

At a government meeting broadcast on national television, Kazakh President Nursultan Nazarbayev said that the depreciation of the Russian rouble and a sharp fall in oil prices in the past year meant that it was becoming far too costly to defend the tenge.

“Let us face it, this is a necessary measure, there was no other alternative. Crisis always brings about change,” he said.

This is a major policy shift for Kazakhstan which had been alone in the Central Asia and South Caucasus region in stubbornly defending its currency. Perhaps the sudden devaluation of the Chinese yuan earlier this month was the trigger for the Kazakh devaluation.

Kazakh exporters had been struggling as their products became more expensive.

The devaluation will also damage the reputation of the Central Bank and the tenge. This is its second devaluation in 18 months. Since February 2014, the tenge has lost 39% of its value.

ENDS

(News report from Issue No. 244, published on Aug. 21 2015)

Kazakh Central Bank widens tenge trading corridor

Kazakhstan’s Central Bank chief Kairat Kelimbetov extended the bandwidth that the tenge could trade against the US dollar to 182-198 from 182-188, effectively giving it room to devalue by over 5%.

Hours after Mr Kelimbetov’s statement, exchange bureaus in Kazakhstan had already upped the price of $1 to over 188 tenge, breaking the psychological 187 value it had been pegged around for so long.

A drop in the value of the Russian rouble and the price of oil has pressured the tenge. The Kazakh Central Bank has stood firm, though, and defended the value of its currency while neighbours have devalued.

Still, Mr Kelimbetov said external pressures had triggered the bandwidth extension and that the move was designed to shift the tenge towards a full free-float over the next 12 months.

“This corridor allows the currency to fluctuate independently of the negative scenarios that may take shape outside Kazakhstan,” he said.

Mr Kelimbetov, though, said he didn’t see the tenge dropping below 192 against the dollar in the next 6 months.

The government has said that it wants its monetary policy to target inflation rather than a tenge-US dollar rate.

This bandwidth extension follows on from a gentle recalibration of the tenge. The Central Bank has allowed it to lose a couple of percentage points in value against the US dollar this year. In February 2014, the Kazakh Central Bank devalued overnight by 20%.

Georgia’s PPI jumps up, again

JULY 15 2015 (The Conway Bulletin) – Georgia’s Producer Price Index (PPI) measured 10.2% higher in June compared to a year earlier, Geostat reported, signalling creeping inflation. Geostat said manufacturing prices had pushed up. Georgian officials have been warning of inflation linked to the devaluation of the lari.

ENDS

(News report from Issue No. 240, published on July 16 2015)

Azerbaijani manat stays stable

JULY 16 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank chief Elman Rustamov told local media that he expected the manat currency to remain stable if oil prices steadied at around $50/barrel. The Central Bank devalued the manat by a third in February.

ENDS

(News report from Issue No. 240, published on July 16 2015)

Currency transactions rise in Azerbaijan

JULY 9 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank reported that foreign currency exchanges increased by more than 50% in the first six months of the year compared to the same period in 2014. In Feb., Azerbaijan devalued its manat currency by a third.

ENDS

(News report from Issue No. 239, published on July 9 2015)

Kazakh Central Bank spends reserves

JULY 8 2015 (The Conway Bulletin) – Kazakhstan’s foreign currency reserves declined by 4.4% in the first half of 2015, data from the Central Bank showed. Kazakhstan, like other countries across the region, has been defending the value of its currency by spending its reserves.

ENDS

(News report from Issue No. 239, published on July 9 2015)

Kyrgyz som amount falls in bank accounts

JULY 3 2015 (The Conway Bulletin) – The amount of som held in Kyrgyz bank accounts has fallen by 11% since the beginning of the year, the Central Bank said, a reflection of the reduced confidence that people in Kyrgyzstan have of their national currency. The som, like other Central Asian currencies, has lost around a third of its value since November 2014.

ENDS

(News report from Issue No. 239, published on July 9 2015)

Moodys cuts Azerbaijani bank ratings to negative

JUNE 30 2015 (The Conway Bulletin) – Moodys, the ratings agency, downgraded Azerbaijan’s banking sector to negative from stable, reflecting the country’s tough economic outlook.

Azerbaijan devalued its currency by a third earlier this year, undermining the
banks, Moodys said.

“We believe that banks’ asset quality will deteriorate following the local-currency devaluation, as most foreign-currency loans in Azerbaijan are to borrowers that do not have foreign-currency revenues,” Moodys said in a report.

Stubbornly high consumer spending and inflation is also pressuring Azerbaijan’s econ- omy.

Based on an average price of a barrel of oil of around $55, Moodys said that Azerbaijan’s economy would grow by 1% this year, one of the slowest growth rates in the developing world.

Oil production dominates Azerbaijan’s economy. Moodys estimated that the hydrocarbon sector contributed around 37% of Azerbaijan’s GDP last years.

Azerbaijan said that is is trying to boost gas sales to Europe but this is not due to come on-stream for several years.

ENDS

(News report from Issue No. 238, published on July 2 2015)