Kazakhstan to peg tenge to U.S. dollar, euro, rouble

Aug 28. Reuters

Kazakhstan to peg tenge to U.S. dollar, euro, roubleKazakhstan’s central bank said on Wednesday it would drop its managed float of the tenge currency and peg it to a basket including the dollar, euro and Russian rouble, starting Sept. 2.

The U.S. dollar will account for 70 percent of the currency basket, the euro for 20 percent and the Russian rouble 10 percent, the bank said.

The initial rate of the tenge to the basket of foreign currencies will be set at 113.7 tenge, National Bank Chairman Grigory Marchenko told a news conference.

“We do not rule out that China’s yuan can become part of the currency basket in the future,” he said.

Kazakhstan’s central bank has so far used a managed float mechanism to control the stability of the tenge. It has used the U.S. dollar as a reference currency.

The Central Asian country, the second-largest post-Soviet oil producer after Russia, had previously used a currency corridor which it dropped in 2011.

The official rate of the tenge rose to 152.16 per dollar on Wednesday from 152.47 in the previous trading session on Tuesday.

“We will not allow further strengthening of the tenge … below 152,” Marchenko said on Wednesday.

He said the central bank had sold $1 billion in July and bought $800 million in August to help steady the currency.

The central bank of Kazakhstan’s large northern neighbour, Russia, runs a managed float of the rouble against a target currency basket made up of dollars and euros.

The policy allows Russia’s central bank to use market interventions to smooth volatility, without having to defend levels that might encourage a speculative attack.

http://www.reuters.com/article/2013/08/28/kazakhstan-currency-idUSL6N0GT23Q20130828

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