Kazakhstan’s tenge weakened after the National Bank announced plans to end the requirement for quasi-state-owned companies to sell a portion of their foreign currency earnings, although analysts said the measure’s actual impact on the exchange rate is likely to be limited.
Over the past two trading sessions last week, the U.S. dollar rose against the tenge on the Kazakhstan Stock Exchange (KASE), reaching 477.4 tenge. By early Friday, however, the dollar had fallen to about 464 tenge.
Analysts at Freedom Broker said the shift in the exchange rate followed comments by National Bank Governor Timur Suleimenov that the regulator would abolish the mandatory sale of foreign currency earnings by quasi-state companies.
Analysts expect limited impact
Freedom Broker analysts said they expect the decision to have only a minimal effect on the exchange rate, citing similar experience in 2023.
They forecast that the exchange rate could return to around 480 tenge per dollar, after which its longer-term direction will become clearer.
Market sentiment may be affected
Analysts at the Association of Financiers of Kazakhstan (AFK) shared a similar assessment.
According to the association, quasi-state entities have sold an average of about $331 million in foreign currency each month since the beginning of the year, accounting for just 4.8% of total trading volume in Kazakhstan’s foreign exchange market.
«Therefore, changes to the current mechanism will likely have a greater impact on market participants’ exchange rate expectations, while their direct effect on the balance of supply and demand in the domestic foreign exchange market will likely be more limited,» the AFK said.
The AFK noted that the foreign exchange market is also being influenced by demand for foreign currency from companies and government entities implementing major infrastructure projects and purchasing equipment abroad.
