USD/KZT Exchange Rate Overview

Outlook and Perspective on the Tenge

According to the National Bank of the Republic of Kazakhstan (the NBRK), the average exchange rate against the U.S. dollar for the nine months of 2024 was KZT 458.7. As compared to the annual average exchange rate for 2023, there was an increase of 0.5% or KZT 2.5.  When compared to the same period of the last year (nine months of 2023), the rate showed a rise of 1.3% or KZT 5.8.

 The relatively low average value was due to favorable currency trends earlier in the year. The primary driver for the exchange rate dynamics was foreign currency sales by the National Fund (the NF). Withdrawals from the NF exceeded the planned figures outlined in the Social and Economic Development Forecast of the Republic of Kazakhstan (the SEDF) dated 3 September 2024 by KZT 300.4 billion following the results of eight months of the year, with transfer volumes for 2024 set at KZT 3.6 trillion. Meanwhile, as stated by the NBRK Governor on September 11, 2024, uncertainty remains around further NF withdrawals to cover the national budget deficit, causing an increased risk of pro-inflationary pressure and further reduction of the effectiveness of the State’s monetary policy.

As shown in Figure 1, an increase in transfers from the National Fund (NF) strengthens KZT against USD, while a decrease in transfer volumes weakens it in June and July.  The correlation coefficient for the period from the beginning of 2024 to September was (-)55.8%, demonstrating a significant negative correlation. In comparison to previous years, the correlation coefficient was much lower, as the volume of transfers was lower and their influence was not as evident as it has been this year.

According to the latest incomplete data, the average monthly exchange rate for October 2024 was KZT 485, indicating a depreciation of 5.9% or KZT 27.2 since the beginning of the year. Since the beginning of September, there has been a gradual depreciation of the domestic currency, reaching a peak of KZT 490.8 per 1 USD on October 11, 2024.

According to the World Bank (the WB), Brent crude oil price is within the National Economy Ministry’s forecast of $80 per barrel, averaging $82.7 per barrel following the results of nine months (with a correlation coefficient of (-)51.7%, indicating a moderate negative correlation. This means that as oil prices rise, the exchange rate should strengthen, and vice versa). According to the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan (the BNS), 63.6% of the planned production output was achieved in the first nine months of 2024, according to the Social and Economic Development Forecast.

In the current conditions, the market-leading indicator that may provide short-term direction for the KZT/USD exchange rate is the yield on REPO operations. At the end of September, we observed a sharp increase in the TONIA index yield from 13.38% to 14.44%, resulting in a further strengthening of the exchange rate by 0.4% or KZT 1.96. A similar pattern is noted in recent trends, with the indicator rising from 13.77% to 14.52% and the exchange rate appreciated by 1.5% or KZT 7.25. The correlation coefficient for the period from the beginning of the year to October 23 of this year was (-)38%, indicating a moderate negative correlation between the variables.

Thus, by the end of the year, if all else being equal, the exchange rate is expected to range between 483 and 492 KZT per USD, according to BCC Invest’s projection model, with a 95% confidence interval.