National Bank is ready to support tenge with foreign exchange and gold reserves

The National Bank of Kazakhstan is ready to utilize its foreign currency and gold reserves to support the tenge, according to Aliya Moldabekova, deputy chair of the bank.

«In the event of unreasonable pressure on the tenge not conditioned with the fundamental factors, the National Bank is ready to supply an additional amount of foreign currency to the market by using its foreign exchange and gold reserves,» Moldabekova wrote in a statement.  

The National Bank has also explained the current weakening of the national currency. As of Jan. 5, the stock exchange price of the U.S. dollar reached 526.3 tenge, marking a 0.2% appreciation.

The regulator emphasized that the closure of international financial markets has resulted in low trading activity. On that day, the trading volume was just $119.5 million. In comparison, the daily volume reached $172 million in January 2024 and $254 million in December 2024.

The National Bank also pointed to the fact that the U.S. dollar keeps appreciating against the national currencies of many developing countries. The U.S. Dollar Index reached 108 points, marking a two-year maximum, indicating investors’ increased interest in this currency.

Another factor contributing to the weakening of the tenge, as outlined by the National Bank, is the plummeting value of the Russian ruble. Thus, as of Jan. 3, the Russian currency had dropped to 110.6 rubles against the U.S. dollar. Given the close economic ties between the two countries, this factor significantly influences the tenge’s value. However, the current exchange rate of the ruble may be distorted due to low liquidity caused by the extended New Year holiday period.

«Moreover, the ruble, as opposed to the tenge, is influenced by various specific factors, including those connected with sanctions. I believe that the dynamics of the Russian ruble should not be used as a reference point in the current reality. It may also contribute to the market’s overreaction, which could potentially distort the exchange rate formation mechanism in the domestic market and result in excessive volatility,» the statement read.

She emphasized that Kazakhstani and Russian markets operate under different conditions. As a result, fluctuations in the ruble shouldn’t impact the Kazakhstani tenge/U.S. dollar exchange rate, as this does not align with the underlying economic context. 

Earlier this year, President Kassym-Jomart Tokayev stated that he considers burning the gold and foreign currency reserves to support the exchange rate of the tenge as meaningless. He made this statement in an interview with the Ana Tili newspaper. The president also noted that he is aware that some market players have advised switching to a more controllable exchange rate. Tokayev emphasized that the National Bank and the cabinet are examining different options to choose the best solution. They will make the final decision once this issue is carefully analyzed.

In December, the National Bank conducted foreign exchange interventions totaling $307.6 million to stabilize the tenge exchange rate. In November, the regulator sold $1 billion from its gold and foreign exchange reserves to achieve the objective.