Mild Downside Ahead For The Tenge

Despite maintaining the Kazakh tenge's de facto peg to the US dollar since mid-2007, trading within a KZT119.40-120.90/US$ range, the unit is showing increasing signs of weakness. On the back of a confluence of adverse developments in the domestic and global economy, we believe that the National Bank of Kazakhstan will allow to tenge to trend towards the top end of the KZT119.40-120.90/US$ band over the short term. Moreover, though the heavily managed nature of the exchange rate regime distorts the emerging technical picture, we nonetheless believe that a firm breach of KZT120.90/US$ would suggest that further devaluation is on the cards.

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