(Bloomberg) -- Kazakhstan’s central bank said it’s conducting market interventions to stem a decline in the tenge after the currency dropped to its weakest level since March 2022.
Officials acted to prevent “destabilizing fluctuations,” smooth out excessive tenge volatility and guarantee foreign-currency supply on the part of the central bank, according to a statement published Thursday. The National Bank of Kazakhstan said it’s ready to continue interventions “to restore a fair tenge exchange-rate formation and ensure normal functioning of the currency market.”
The Kazakh authorities have been grappling with the economic fallout of Russia’s war on Ukraine and sanctions on its neighbor and second-biggest trading partner. The government has also boosted spending on infrastructure and improving living standards after deadly riots shook the nation almost three years ago.
The bank last sold dollars to support the national currency in March 2022 in the aftermath of Russia’s full-scale invasion of Ukraine, when the tenge weakened to a record low of 525.59 per dollar. The Russian central bank was forced to stop buying foreign currency under the budget rule on Wednesday after tougher sanctions triggered what the Kazakh monetary authority called an “accelerated” weakening of the ruble.
The Kazakh central bank also pointed to the strong dollar, oil price volatility and expectations of more crude supplies and prospects for trade tariffs after the election of Donald Trump as US president.
Kazakhstan said Nov. 12 that it was ready to intervene and announced a week later that it would order state firms to sell half of their foreign currency revenue in an effort to stem the tenge’s decline. The average volume of trading in November reached $238 million a day compared with $193 million a year earlier and was also “significantly” higher than in August and September, the central bank said Thursday.
While some state companies began foreign-currency sales last week, according to people familiar with the situation, the central bank said today that a “restricted supply” had been observed, partially because the tenge breached what it called the “psychological level” of 500 per dollar.
While the central bank had been selling dollars from reserves since August as part of the government’s purchase of shares in uranium miner Kazatomprom, those sales have not targeted tenge fluctuations.
Policymakers are scheduled to meet Friday to discuss the key rate, which currently stands at 14.25%.
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