The Tenge’s Uncertain Future

Since May of this year, the tenge has depreciated by almost 20% to around 520 per dollar. In November alone, the depreciation amounted to 5%. In response to this, the Central Bank raised the base rate by 100 basis points to 15.25%, and also intervened with $1 billion in the currency market for the first time since May 2022. Now, the regulator revised forecasts for inflation and economic growth, saying the situation will be worse than expected.

During a briefing last Friday, the Chairman of the Central Bank Timur Suleimenov said that the tenge did not weaken due to speculative pressure. On Thursday, US dollar trading volumes reached $770 million, but Suleimenov argued that no speculator would risk trading such a significant amount.

“Therefore, this is not speculative pressure. This is the entire market exerting pressure in finding a new level for the tenge, and speculation has nothing to do with it,” Suleimenov said.

Minister of economy Nurlan Baibazarov, speaking at a briefing on Monday, said the tenge weakened because of three fundamental reasons. The strengthening of the US dollar index, the marginal decrease in oil prices, and the weakening of the Russian ruble.

Under these conditions, according to Baibazarov, the government's main task is to prevent a deterioration of citizens' welfare and reduce the negative impact on entrepreneurs.

Experts interviewed by Vlast agree with Baibazarov’s argument. However, they doubt that the current situation has become predictable enough that it can be easy to guess future trends. And this unpredictability will limit the effect of any government action.

Last week, according to Ansar Abuyev, an analyst at Freedom Finance Global, every item om Baibazarov’s list was checked. This resulted in an increased demand for US dollars, a Central Bank intervention, and an interest rate increase. This scenario has repeated cyclically over the past six years.

Abuyev said that fresh sanctions on Russia’s Gazprombank contributed to the weakening of the tenge. With the latest measures, Russia lost an important source of foreign currency, and the new limits spurred demand for the US currency, something that partially affected Kazakhstan as well. But the tenge exchange rate had already shown weakness before.

“The Central Bank said in a note that net sales of US dollars from the National Fund amounted to $1.36 billion. Despite this, the tenge weakened by 1% over the same period,” Abuyev told Vlast.

According to Murat Temirkhanov, adviser to the chairman of the board of Halyk Finance, the tenge is now weakening sharply after having been “too strong” at the beginning of the year. In May, the US dollar was trading at 440 tenge, while its real value was closer to 465 tenge, according to the expert.

“On Saturday, the Central Bank said that the excessive strengthening of the tenge was not backed by fundamental factors. It was bound to happen due to the government’s increased request for National Fund transfers into the budget,” Temirkhanov told Vlast.

Once transfers were reduced during the summer, the tenge exchange rate weakened to 470 per dollar and gradually worsened. Despite the influence of local and foreign markets, the tenge was still trading at a stronger value than it could. At the time, the real value of the dollar was closer to 485 tenge.

Another point of pressure, according to Temirkhanov, was Donald Trump's victory in the US presidential election. During the election campaign, he promised to bring down oil prices to $40 per barrel and set tariffs on imports.

The listing of Gazprombank in the new sanctions package at the end of November highlighted yet another factor that affects the tenge: its informal peg to the Russian ruble. According to Abuyev, since July 2022, the tenge had lost its traditional correlation with the Russian currency. The informal peg reappeared briefly in September 2023, and then again in August 2024.

"Since August 2024, both currencies have moved the same way. The pair has weakened on the back of a stronger dollar, which began to actively gain value on the world stage around the end of August,” Abuyev added.

Currently, according to Temirkhanov, the equilibrium exchange rate of the dollar would be around 505 tenge.

Freedom Finance Global also believes that the rate of 500 tenge per dollar is becoming a “new reality” for Kazakhstan. The Central Bank managed to “put out the fire" on the currency market through both planned and prospective interventions.

"However, it is difficult to predict how the currency will move in the future. We expect a decrease in volatility in December and a stabilization in the first two months of next year, which are seasonally strong for the tenge [due to global oil demand]," Abuyev said.

Temirkhanov, in turn, considers it difficult to give estimates even until the end of the year. Previously, Halyk Finance analysts forecasted a weakening of the tenge to 525 per dollar by the end of 2024, but now analysts do not find the trend sufficiently predictable to revise their forecast.

"We want to wait until January-February, when it becomes clearer whether Trump will fulfill his election promises. This would give guidance on oil price trends. Because this is the most fundamental factor for Kazakhstan. If oil prices reach $60/barrel, then the rate will weaken in response," Temirkhanov said.

But even discounting the effects of Trump's initial decisions, the tenge will continue to weaken due to high inflation, which will reach around 8.5% by the end of the year. Such increased costs reduced the purchasing power of citizens, which in turn negatively affects the purchasing power of the tenge.

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