Twice-told tenge tales

 

 

Savvy speculators know that the exchange rate of tenge per dollar is slightly less sedate than the OK Corral.  So the steady-as-she-goes exchange rate of tenge per ruble always surprises. The figure above shows that exchange rate since January 1, 2021.  The long-run equilibrium is 6 tenge per ruble.  The lack of movement in the exchange rate over 2021 suggests that the National Bank of Kazakhstan may have intervened in the foreign exchange market more often than it has let on. Historically, the central bankers in Almaty (now in Nur-Sultan) have broken out into hives whenever the ruble value of a tenge rose or fell, because they viewed Russia as Kazakhstan’s leading partner in trade (which it isn’t. In 2019, the most recent "normal" year, Russia bought only a tenth of Kazakhstan’s exports.  Even before Putin’s War, Russia ranked only third among Kazakhstan’s export buyers, trailing Italy and China).  

And now for the real drama. In early March 2022, the West announced that sanctions against Russia would not preclude the central bank of Russia. The tenge strengthened accordingly, hitting 4 tenge per ruble on March 10.  Then the tenge weakened steadily to 9.1 tenge per ruble on June 30, about when Kazakhstani President Kassym-Jomart Tokayev publicly criticized the Ukrainian War in the glowering presence of Russian President Vladimir Putin.  In a few days, on allegedly environmental grounds, a Russian court ordered removal of Kazakhstani oil from the Caspian Pipeline Consortium, the main pipeline for delivering this oil. The pipeline runs from Tengiz and across Russia to Novorossiysk on the Black Sea, leading to European export markets.  Although another Russian court countermanded this removal in just a few days, it served its probable purpose as a warning shot at Tokayev. The CPC pipeline accounts for about a third of Kazakhstan’s government revenues, according to the journalist Almaz Kumenov.

Since June, the tenge has strengthened to 8 tenge per ruble. But this rate remains well above the equilibrium rate of 6 tenge. There are no compelling signs in the forex market that the tenge will strengthen to its equilibrium value anytime soon. So if you’re going to hold tenge, prepare to hold them until you die of old age.

The exchange rate data are from the National Bank of Kazakhstan. I retrieved them from nationalbank.kz  .   --Leon Taylor, tayloralmaty@gmail.com

 

References

Kumenov, A.  (23 August 2022). Kazakh oil exports across Russia interrupted for fourth time this year.  Retrieved from Kazakh oil exports across Russia interrupted for fourth time this year | Eurasianet

Lillis, Joanna.  (20 June 2022).  Kazakhstan-Russia frictions over Ukraine war go public.  Eurasianet.org.  Retrieved from Kazakhstan-Russia frictions over Ukraine war go public | Eurasianet.