Weekly Forex Review (July 11-15, 2022)

Over the past week, the national currency continued to decline against all traded currencies. During the week, the tenge weakened against the US dollar by 1.15% to 480.37 tenge, against the ruble by 8.16% to 8.35 tenge. The tenge has shown a weakening against the dollar by 2.13%, and a strengthening against the ruble by 7.2% (since the beginning of the year by 11.25% and 44.97%, respectively) since the beginning of the month.

Last week, there was a slight increase in the volatility of the USD KZT pair. We note that during the trading day, the exchange rate is weak on small volumes in the absence of a wide offer, but then after volumes on the supply side it began to strengthen. As a result, during the trading day, we could see quite sharp spike in the exchange rate and disproportionately distributed volumes.

As a result, the trading volume of the USDKZT pair over the past week increased by 57.6% relative to last week’s value (an increase of 7.0% compared to the average weekly trading volume in 2022) and amounted to $ 635 million.

Jusan Analytics Opinion

The weakening of the tenge is affected by changes in fundamental conditions such as prices for the main exported commodities, the global strengthening of the dollar, the growth of imports and outflows due to the observed peak of economic activity. Market participants have carried out a certain reassessment of internal and, to a greater extent, external conditions. All this is reflected in the equilibrium rate shift towards weakening. The excessive degree of weakening is added by household inflation expectations and a decrease in the attractiveness of tenge assets. In our view, without raising rates on tenge assets or anchoring inflation expectations, the pressure on tenge will increase, especially if the assessment of external conditions shifts to the negative side.

 


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