Tenge will be pegged to the currency basket

Sept 04. Kazpravda. Almaty

By Alevtina DONSKIH

Tenge will be pegged to the currency basketFrom September 2, 2013 the National Bank of Kazakhstan pegs the national currency to the multi-currency basket composed of the dollar, euro and Russian ruble.

According to the NBK press service, from February 2011 the National Bank has been conducting the policy of managed float of the national currency’s exchange rate. This mode involves the participation of the National Bank in foreign exchange trade only in order to smooth plummeting of exchange rates without affecting the formation of the general trend of exchange rate dynamic set by the market prerequisites. At that the NB has an impact on the dynamics of the exchange rate of tenge to dollar.

Meanwhile, against the background of dynamic development of integration processes, trade and foreign economic relations of Kazakhstan with major trading partners, as well as growing mutual fluctuations of major world currencies, it is necessary to improve approaches to the exchange rate policy. The purpose of the introduction of multi-currency basket in the country is to change the operational target in the exchange rate policy. Instead of pegging to dollar, the NBK will cater to dynamics of the above three currencies. At the same time, the report says that the National Bank alongside with the establishment of the cost of the basket currencies will continue to establish official rates of KZT to these currencies in the former regime.

NBK justifies this decision by the fact that the main advantage of the multi-currency basket regime will be a gradual decline of the dollar’s role in the domestic market and in foreign trade, as well as reduction of speculative mood, mitigation of adverse effects on the inflow and outflow of speculative capital in the foreign exchange and money markets of the country that have a temporary effect on the volatility of exchange rate of tenge to dollar. The structure of multi-currency basket was defined in the following proportions: the dollar’s share is 70%; Euro — 20%; Russian ruble — 10%. The cost of multi-currency basket will be calculated as average geometric weighted values of exchange rate of tenge to dollar, euro, and British pound as of a given date. Also the cost of official multi-currency basket, expressed in the national currency will be calculated on the base of an average exchange rate of tenge to dollar, formed at the morning session on the Stock Exchange as of 11.00 a.m.; the rate of KZT to euro and ruble is calculated with the use of cross-rate to dollar as of 15.00. As the operating landmark, the multi-currency basket will be calculated on a regular basis throughout each day and on the result of each session of trading on the KASE.

As part of the monetary policy the National Bank will intervene, affecting the dynamics of KZT exchange rate to the dollar, thereby adjusting the value of multi-currency basket, it is emphasized in the statement. The structure of multi-currency basket will be revised with the development of monetary market, expansion of trade cooperation and the use of national currencies in international payments, through the change of proportion of the currencies included in the multi-currency basket, as well as through the introduction of other countries’ currencies, such as the Chinese Yuan.