Kazakhstan on Tuesday devalued its tenge currency by 19 per cent to about 185 per dollar, taking the wind out of the sails of speculators and adjusting the rate to the freer float of its main trading partner Russia.
Kazakhstan's tightly managed float was undermined by Russia allowing the rouble to slide amid a broader retreat from emerging market currencies sparked by the scaling back of US monetary stimulus. Analysts were surprised by the size of the move, which was far larger than the rouble's five per cent decline this year, and reflected a desire to put a floor under the currency of the Central Asian nation, a big exporter of energy and commodities.
"From a qualitative perspective it makes sense. The quantity ... is way too much," said Ivan Tchakarov, a Moscow-based economist at Citi who covers Russia and the Commonwealth of Independent States. Political turmoil in ex-Soviet Ukraine has forced the central bank there to loosen its grip on the hryvnia currency, which has lurched lower as President Viktor Yanukovich battles to contain a balance of payments crisis. Russia has suspended a $15 billion bailout until a new government can be formed.
Shortly after the announcement, the official rate of the tenge fell to 163.90 to the dollar from 155.56 on Monday. At 0830 GMT, the tenge fell by 19.46 per cent to 186 per dollar on the Kazakh interbank market.
"The National Bank will protect the tenge from sharp moves ... away from the new level of 185 to the dollar," central bank governor Kairat Kelimbetov told a news conference.