Swings in the national currencies roil trade between the two ex-Soviet nations, whose border is the world’s second-longest after the frontier between the US and Canada.
But the tenge has given up a lot of ground since reaching the strongest level ever against the rouble in January 2015, losing more than half its value against its Russian counterpart since then. It hasn’t traded stronger than 5 versus the rouble for more than a year.
By matching devaluations of Russia and China in 2015, Kazakhstan dissuaded people from loading up on cheaper imports, giving local businesses an edge in fighting for market share. The suspicion now is that Kazakhstan is again steering the exchange rate back into balance, with Macro Advisory consultancy in Moscow saying the tenge is linked to the rouble “for competitiveness reasons.”
Speaking in an interview, Governor Daniyar Akishev said the National Bank of Kazakhstan is doing nothing to massage the Kazakh currency weaker. Policy makers stand by their free-float regime, with the central bank’s net interventions equal to zero.
“No tie-up exists between the tenge and the rouble,” Akishev, 41, said in Almaty last week. “There may be a correlation that’s developed historically, but we aren’t targeting the exchange rate. At any given moment, it depends on the situation in the economies of our countries.”
Kazakhstan’s central bank has moved to align monetary policy closer with its biggest trade partner after waiting until August 2015 to cut the tenge loose, more than eight months later than the Bank of Russia allowed the rouble to trade freely. By the time Akishev was appointed in November 2015, the Kazakh currency had slumped by more than 40% against the dollar as oil crashed. The $184bn economy of Central Asia’s biggest energy exporter has regained its footing as crude prices stabilised.
Under Akishev’s stewardship, the central bank has cut borrowing costs twice this year after four decreases in 2016, bringing its key rate to 10.5% in June.
Annual price growth has remained near the 8% upper limit of the central bank’s target corridor after slowing to within the range this year.
The 60-day correlation between the currencies of Russia and Kazakhstan is near the highest since late 2014. The tenge depreciated 0.2% against the rouble on Friday after a loss of 0.9% the previous day, according to data compiled by Bloomberg. “The main target for us is and will be the level of prices,” Akishev said.
The tenge’s current exchange rate of near 5.5 against the rouble “reflects the reality in the balance of payments of our countries and the structure of our economies and trade.”
The currencies of Russia and Kazakhstan now function as shock absorbers for the economies, protecting government revenue from swings in commodity prices.
As oil took a dive into a bear market this month, the tenge and the rouble are among the world’s worst performers in June against the dollar.
While the tenge’s real exchange rate is “undervalued” compared with late 2013, benefiting local producers, the effect has been achieved without any interventions by the central bank, which is only present in the currency market to smooth sharp fluctuations, according to Akishev.
“Our influence is neither decisive nor substantial” for the market, he said. “In this situation, it’s difficult to speak about the National Bank having any target, even in the form of a real exchange rate that could be comfortable for our policy.”
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