Analysts at the Association of Financiers of Kazakhstan (AFK) have significantly raised their one-year forecast for the dollar to 573 tenge, up from 548.5 in the previous outlook — a deterioration of 24.5 tenge for the local currency, according to an AFK statement.
They have also slightly downgraded their forecast for the tenge exchange rate in a month, from 523.4 to 541.7 per dollar. On Aug. 8, the weighted average rate in trading was 539.81 tenge per dollar.
According to AFK, expectations for the tenge exchange rate have deteriorated amid strong volatility in the foreign exchange market not supported by fundamentals, as well as an expected decline in the trade balance surplus, higher domestic demand for foreign currency and unstable price dynamics in commodity markets.
The revision of exchange rate expectations was accompanied by heightened inflation concerns. In August, one-year inflation forecasts rose to 11.3% from 10.4% a month earlier, reflecting concerns about faster price growth driven by tax increases, businesses passing on higher costs — including for transport, logistics, and raw materials — to consumers and higher prices for imported goods due to the weakening tenge.
This combination of factors is likely to prompt the regulator to maintain a tight monetary policy and preserve a positive real interest rate to curb inflationary pressure. The forecast for the base rate over the coming year has been raised from 14.75% to 15.25%. At the same time, the real interest rate may rise to 4.9%, compared with the current 4.7%.
In early August, Kazakhstan’s National Bank reported that at the end of July, the tenge had weakened by 4% to 540.72 per dollar. In late July, the National Bank carried out $125.6 million in currency interventions after the dollar traded at 550 tenge.
