Kazakhstan: Tenge slumps to new all-time low amid plunging oil prices
Kazakhstan’s tenge (KZT) sank to a record low against the U.S. dollar over the past few weeks, hammered by the steep fall in oil prices. The currency ended 3 April at KZT 446 per USD, marking a 14.6% depreciation over the same day in March. Furthermore, the currency was down 14.7% year-on-year and 13.9% year-to-date.
The dramatic sell-off of emerging market assets prompted by the Covid-19 pandemic and plummeting oil prices due to the Saudi–Russian price war, combined with the Central Bank’s decision to stick to the floating regime instead of intervening to halt the currency’s slide on 10 March, weighed heavily on the tenge in March. In order to stem the fall of the currency, on 23 March the government forced state-owned companies to sell foreign currency revenue; and, a day later, the Central Bank tightened its foreign exchange control, which helped the tenge stabilize somewhat thereafter.
Going forward, the tenge is expected to regain ground on an expected pick-up in demand for fuel as the health crisis subsides. In addition, a high interest rate differential bodes well for the currency ahead, although it will take time for capital inflows to return to pre-pandemic levels as global uncertainties linger.