National Bank May Have Supported Tenge through Currency Interventions — Economist

Economist Galymzhan Aitkazin discussed the exchange rate, Orda.kz reports. 

Meanwhile, sharp changes in the currency market and record trading volumes on the Kazakhstan Stock Exchange (KASE) have occurred.

The most alarming moment was the behavior of the tenge to ruble cross rate (RUB/KZT), which strengthened yesterday to 4.3-4.4 for the first time since August 2023 amid a sharper weakening of the neighboring currency, and before that it was at these levels in March 2022. That is, there was a sharp departure of the cross rate from the long-term parity of five, which, in fact, reflects the consensus of market participants regarding exchange rates, noted Aitkazin. 

On November 27, the trading volume on the KASE currency section reached $455.4 million. 

This is more than twice the previous day's figure, and daily trading broke record levels. Such activity is considered abnormal and may indicate regulatory intervention.

We are inclined to believe that the belief of market participants in a stronger tenge to the dollar compared to the Russian currency, as a factor explaining the behavior of the cross-rate, is unlikely in the current realities. This is due to the current internal factors and rhetoric regarding the tenge to the dollar exchange rate itself. Therefore, there is reason to assume that the National Bank of Kazakhstan could have carried out currency interventions yesterday to support the tenge, which can also be judged from the record trading volumes on KASE,  Aitkazin indicated. 

The economist also recalled the mandatory sale of 50% of the quasi-public sector's foreign exchange earnings, which could support the tenge exchange rate further. 

The regulator has not made any official statements.

Original Author: Alina Pak