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Kazakhstan devalues tenge due to foreign exchange situation at Customs Union markets, says National Bank of Kyrgyzstan

February 11, 2014

The National Bank of Kazakhstan on February 11 made single-step devaluation of Kazakh tenge to around 185 tenge from 155.56 tenge for $1. The central bank of Kazakhstan also said it reduces the size of interventions and established the range of fluctuation of tenge +/- 3 tenge from 185 tenge for $1. "In nominal terms, Kazakh tenge dropped for 30 tenge or devalued by some 19%. The fixed exchange rate of tenge remains the same," the National Bank of Kyrgyzstan said in its comments about the situation. The National Bank of Kazakhstan explained devaluation saying its economy is closely integrated into the global economy making it impossible not to take into account the situation at the world financial and commodity markets. Thus, since start of 2014 the tenge devalued by 20.1% against US dollar. Kazakhstan is a member of the Customs Union and developments in the Russian and Belorussian economies will necessarily impact economic situation in Kazakhstan and vice versa, the National Bank of Kyrgyzstan explained. The market exchange rate of tenge against som in Bishkek fell to 0.25 som. Belarus had to devalue its ruble by 11.1% against US dollar in 2013. Since start of 2014, the Belorussian ruble weakened by 12.8%. The Russian ruble weakened by 7.5% against US dollar in 2013 and by 6.5% since start of 2014. In total, the Russian ruble weakened by 14%. The Kyrgyz som dropped 3.9% versus US dollar in 2013 and since start of 2014 by 3.9% more. In total, the Kyrgyz som weakened by 7.8%. The previous devaluation of Kazakh tenge was made on 4 February 2009, when the National Bank of Kazakhstan changed the equilibrium value of the US dollar-tenge exchange rate, having raised it from 120 tenge for $1 to 150 tenge with fluctuation of 3% or 5 tenge. Thus, one time growth of the exchange rate made 25%. The reasons of such abrupt change of the value of the Kazakh tenge were negative effects of deteriorating global financial crisis and economic situation in Russia in 2008. "The situation at the foreign exchange market of the Kyrgyz Republic is different, since our country has floating exchange rate, which proved its effectiveness in adaptation to changes at the world markets and in domestic macroeconomic situation. In 2013, the exchange rate of US dollar against som remained stable, requiring no intervention of the National Bank. For this reason it was enough for the National Bank of Kyrgyzstan to make one time intervention in the first half of the year in selling $14.7 million. This year the situation is different. Some pressure at foreign exchange market is observed, which is connected with exogenous shocks from Russia at first and this time from Kazakhstan. In connection with this, the National Bank made 3 interventions to smooth out abrupt changes of the exchange rate on January 21 in the amount of $9.9 million, on January 24 in the amount of $17.5 million, on February 5 in the amount of $7.25 million. The total volume of interventions in 2014 amounted to $34.65 million," the National Bank of Kyrgyzstan said in its statement. The National Bank of Kyrgyzstan said it monitors the current situation at external financial markets and internal foreign exchange market. The available stock of international reserves in the amount of $2.2 billion will allow to satisfy potential scope of demand for the foreign currency. When necessary, the National Bank will make interventions at cash and non-cash foreign exchange markets to prevent panic among population and to even out sharp changes of exchange rate.

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Source: AKIpress News Agency (Kyrgyz Republic)

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