Tag Archives: currency

Kazakh tenge slides to five-month low

ALMATY, JULY 28 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said it will not intervene to prop up the tenge currency after it lost 3.5% of its value over the past week, hitting a five-month low of 354/$1 on Thursday.

This is the sharpest drop since February, the tail-end of a two year fall for the tenge during which it has lost half its value against the US dollar.

Even so, Adil Mukhamedzhanov, deputy director for monetary operations at the Central Bank, told Kazakh media that interventions would be light.

“Several factors impacted the exchange rate, chiefly low oil prices and worsening exchange rates of our trading partners,” he was quoted as saying.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Volatility to weaken the Kazakh tenge

AUG 1 2016 (The Conway Bulletin) — It has taken Kazakhstan a long time, but it could finally have reached its goal of having a free-floating currency.

The nightmare of last August when the tenge depreciated sharply against the US dollar after the Central Bank removed its currency peg, seems over.

That was the uncertainty of having a Central Bank chief, Kairat Kelimbetov, who didn’t show resolve and authority, and the uncertainty of living through a period of falling oil prices.

Gradually, since November 2015, when Daniyar Akishev was made the Central Bank chief, Kazakhstan has switched to a more hands-off policy, allowing the tenge to slide as the market demanded.

This new policy created another kind of uncertainty. The tenge will float freely, swept by oil prices and the performance of other currencies in the region.

This could mean that, with oil prices sliding back towards $40/barrel and the US Federal Reserve planning to raise interest rates, Kazakhstan could soon be facing an even weaker tenge.

The tenge depreciated by 5% this month, to 354/$1 and the outlook for the next few months is not promising. Analysts have said that this could be the beginning of a gradual slide that only much higher oil prices could reverse.

In an oil price scenario that has come to be known as ‘lower for longer’, a three-figure oil price, as it was in 2014, will remain unlikely for a while.

In addition, the Russian rouble seems to be limping behind the US dollar, which is causing a negative ripple effect on currencies across Central Asia and the South Caucasus. Kazakhstan’s membership of the Eurasian Economic Union bloc is, in this case, a determining factor for the tenge.

Domestically, too, with apparent terror attacks in western Kazakhstan and unprecedented violence on the streets of Almaty, the situation is not looking good. Insecurity has never been a foundation for currency stability.

And then, of course, there is the economic headache of negative growth, and falling oil production which will continue to undermine the tenge.

The tenge is unlikely to thrive in this contingency.

The ‘$1 stores’ that mushroomed across Kazakhstan towards the end of last year, selling items at the fixed price of 300 tenge, might now be forced to adjust their price, possibly on a daily basis, to reflect a worsening exchange rate.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Georgia Central Bank chief says he may let lari value fall

TBILISI, JULY 21 2016 (The Conway Bulletin) — Koba Gvenetadze, the new chief of the Georgian Central Bank, hinted that he wants the lari currency to slide further to keep pace with Georgia’s neighbours who have all seen their currencies fall heavily over the past two years.

Mr Gvenetadze said that the lari had strengthened too much against the US dollar earlier this year and as soon as the Central Bank relaxed its interventions in the currency market in mid-June, it slid to 2.34/$1, down from a high of 2.13/$1.

“Part of the population thinks that a steady foreign exchange is a synonym of stability, but that’s wrong,” Mr Gvenetadze told the newspaper Rezonansi in an interview designed to lay out his monetary policy. Mr Gvenetadze took over as the Central Bank chief in March.

He said that if people continue to use US dollar-equivalent measures to calculate their wealth or the value of their property, the lari will continue to suffer.

“Sometimes unpopular decisions can be made, but we need to see what happens in the future,” Mr Gvenetadze said.

After losing 27% of its value in 2015, the lari had strengthened significantly against the dollar, gaining 13% by June. Since then, though, it has fallen back to January levels.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazakhstan’s C. Bank bets against sterling

JULY 8 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank chief Daniyar Akishev said he bet against the sterling ahead of Britain’s referendum to leave the EU, commonly known as Brexit. As he expected market volatility in the aftermath of the vote, Mr Akishev said the Central Bank opened a long position to sell off part of its sterling holdings, effectively gaining from the post-Brexit plunge of the British currency against the US dollar.

ENDS

(News report from Issue No. 289, published on July 15 2016)

Tajikistan publishes negative forecasts for Somoni currency

JULY 14 2016 (The Conway Bulletin) — Tajikistan’s finance ministry published a negative forecast for the somoni currency exchange rate over the next few years, saying that the economic crisis that has hit the region since mid-2014 could be far from over. According to the official forecast, the somoni will weaken against the US dollar by 21% next year and by a further 8% in 2018. This week the official exchange rate was 7.9/$1. Much like other currencies in the region, the Tajik somoni has lost a third of its value sine mid-2014, mainly because of a recession in Russia, weakness in oil and gas prices and a drop in confidence in Emerging Markets.

ENDS

(News report from Issue No. 289, published on July 15 2016)

Brexit knocks economies in Kazakhstan & Georgia

JUNE 30 2016 (The Conway Bulletin) — Brexit, Britain’s vote to leave the EU in a referendum on June 23, pushed down stock markets, commodities and currencies worldwide, including in South Caucasus and Central Asia where politicians and business leaders warned of problems ahead.

Kazakhstan was hit by both currency instability and the sudden drop in oil prices, which fell below the $50/barrel threshold it had recovered to earlier this year after the rout of 2014 and 2015.

Uzakbai Karabalin, Kazakhstan’s former oil minister and now deputy chairman of the oil and gas lobby group KAZENERGY, said the government will have to revise down the baseline for oil prices in the national budget this year.

“[Brexit] has already affected oil prices,” he said. “The first response was a decline. Now the economic base price is $50/barrel.”

Previously, the government had said the baseline for this year could have grown to $60/barrel, so a drop to $50/barrel is a pessimistic assessment of the impact of Brexit.

Georgia, less impacted by low oil prices, felt the Brexit effect on its currency, the lari. The lari has fallen by 4.5% since June 23 and Dimitry Kumsishvili, the economy minister, blamed the Brexit result.

“This is most likely a one-off that is directly connected to the UK’s decision to quit the European Union. Of course, this immediately affects our currency,” Mr Kumsishvili said.

He warned that the impact of Brexit had only just started to feed through into the world’s economy and that more economic shocks in the region were likely.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Currencies: Kazakhstan’s tenge, Azerbaijan’s manat

JULY 1 2016 (The Conway Bulletin) – Since mid-2014, a strong US dollar and downward pressures on oil prices have hit economies across Central Asia and the South Caucasus.

Currencies in the region suffered and, despite all the efforts from Central Banks to keep the exchange rate steady by intervening in the market, the fall was inevitable.

Compared to two years ago, all currencies have lost between 15% to 50% of their value. Oil exporting countries (in green in the graph) have fared worse than oil importing countries (pictured in red).

The Kazakh and Azerbaijani Central Banks decided to abandon the currency peg to the US dollar in 2015, causing a plunge in the value of the tenge and the manat. In 2015, these two were among the worst-performing cur- rencies in the world, not just the region.

Oil importers have acted in the opposite direction. In Georgia and Kyrgyzstan, currencies stabilised in the second half of 2015 and Central Banks have tightly controlled exchange rates since.

ENDS

(News report from Issue No. 287, published on July 1 2016)

Central Banks in Kazakhstan and Georgia fight deflationary pressures

ALMATY, JUNE 10 2016 (The Conway Bulletin) — Currencies across the Central Asia and South Caucasus region have stabilised this year after losing 30% to 50% of their value in 2015 thanks, in part, to record high interest rates but governments are now having to deal with deflation.

As well as raising interest rates to their highest level since the Global Economic Crisis of 2008/9, Central Banks bought heavily to defend their currencies. The Kazakh Central Bank said it bought $3.7b in Jan.-May 2016 and in Georgia, the Central Bank intervened twelve times in just two months, although on a smaller scale.

And both Central Banks have now started unwinding high interest rates, hoping to spark economic activity.

Earlier this year the Kazakh Central Bank cut its key interest rate to 15% from 17%. Georgia’s Central Bank cut its interest rate to 7.5% from 8% and promised further cuts. New data from Georgia’s statistics agency highlighted the challenge. It said that prices in May dropped by 0.4%, the third consecutive month of falling prices. Year-on-year inflation in May measured 2.1%, down from a high of 6.3% in November.

And this scenario is playing out across the region.

Last month Armenia’s Central Bank said that year-on-year inflation measured minus 1.9% and immediately cut interest rates by 0.5% to 7.75%.

But Alex Nice, an analyst at the Economist Intelligence Unit, said that the region’s weak banking systems and high levels of dollarisation means that there is little Central Banks can do to impact economic activity.

“The exchange rate is a more powerful lever for managing prices in the economy [than the official interest rate],” he said.

ENDS

(News report from Issue No. 284, published on June 10 2016)

Exchange rate stabilises in Kazakhstan

MAY 30 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said tenge-denominated deposits had grown steadily in Q1 2016, due to the stabilisation of the exchange rate with the US-dollar after five months of high volatility. Commercial banks increased interest rates on deposits in an effort to attract customers. The C.Bank’s decision to lower interest rates earlier in May could now depress deposits and increase spending.

ENDS

(News report from Issue No. 283, published on June 3 2016)

EBRD to issue bond to Azerbaijan’s economy

MAY 25 2016 (The Conway Bulletin) — The EBRD is ready to issue a manat- denominated bond to help de-dollarise Azerbaijan’s economy, the Bank’s President, Sir Suma Chakra- barti, said. While the amount of the issue was not disclosed, Sir Suma said the bond will be sold within Azerbaijan to boost the local currency’s credibility.

ENDS

(News report from Issue No. 282, published on May 27 2016)