Kazakh cbank buys $4.5 bln in Jan-Feb to curb tenge
March 1. Reuters. ALMATY
By Robin Paxton
* Dollar purchases more than double 2010 total
* Currency at strongest vs dollar since Feb 2009
* Inflation 1.5 pct in Feb m/m
Kazakhstan’s central bank bought around $4.5 billion on the foreign exchange market in January and February to curb appreciation of the tenge currency , more than double its total purchases during all of 2010.
The bank forecast on Tuesday that the tenge would continue to strengthen after gaining approximately 1 percent against the dollar since the end of last year, bolstered by resurgent world prices for its crude oil, metals and grain.
The weighted average of the tenge strengthened beyond 146 to the dollar for the first time since the currency was devalued in February 2009. It averaged 145.90 versus the dollar on Tuesday, compared with 147.34 at the end of last year.
“In the near future, we do not expect any changes to this trend. On the contrary, the factors supporting appreciation could gain further strength,” the bank said in a statement.
Oil prices have surged to their highest in 2-1/2 years as a revolt in Libya cut supply and led some investors to bet on tensions spreading to other oil producers in the Middle East and North Africa.
The strengthening tenge poses a challenge to Kazakhstan’s $147 billion economy, the largest in Central Asia, as exporters fight to preserve their competitiveness and the central bank strives to keep inflation within its 6-8 percent annual target.
Inflation in Kazakhstan slowed to 1.5 percent month-on-month in February from 1.7 percent in January, the state statistics agency said, taking consumer price growth to 3.2 percent since the end of 2010.
Food prices rose 2.0 percent over the month, while non-food inflation was 0.2 percent and tariffs and services rose 2.2 percent, month-on-month, in February, the agency said.
Kazakhstan’s dilemma mirrors those experienced by other emerging economies over the past year. Some have imposed more stringent capital controls in response, prompting warnings of a global “currency war”.
The central bank returned the tenge to a managed float from Monday, scrapping a trading corridor introduced after the devaluation to ease the economy through the global financial crisis.
Originally set at 145-155 per dollar, the corridor was widened to 127.5-165.0 in February 2010.
“The removal of the currency corridor in favour of a managed float will allow the tenge to strengthen, if necessary, at a balanced level that is comfortable for the economy,” the central bank said.
It said it would pursue a currency policy aimed at ensuring “stability of the national currency and the preservation of a favourable, competitive environment for domestic producers”.
Kazakhstan’s economy recovered to grow by an estimated 7 percent last year from 1.2 percent in 2009, as commodity prices rose and banks restructured billion-dollar debts. The government forecasts economic growth of 5.0 percent this year.