The Troubling Tumble of the Kazakh Tenge
Plummeting Oil Costs and Trump Tariffs Trigger Unpredictability in Tenge Exchange Rates
ASTANA - Swinging oil prices and the controversial U.S. trade decisions have sent shockwaves through the financial world, causing a rollercoaster ride for the tenge. Here's the scoop on what's going down.
First off, let's address the elephant in the room: President Trump's tariff announcements. Although Kazakhstan wasn't a direct target, the Tenge still took a dive, thanks to the turmoil caused in global markets. Donald Trump slapped a 27% duty on all goods from Kazakhstan, in turn causing a stir and sending the Tenge into a whirlwind of uncertainty.
On April 7, the Tenge stood at 519.12 tenge per U.S. dollar on the Kazakhstan Stock Exchange (KASE), weakening by a staggering 2.7% compared to the previous day. Over the week, the Tenge weakened by 2.9%.
But let's not blame Trump just yet. According to Galymzhan Aitkazin, a renowned Kazakh economist, decisions from the U.S. administration aren't the main culprits behind the Tenge's struggles. Instead, the real danger seems to lie in the plunging oil prices, a problem that's gotten increasingly tough to ignore.
Brent crude oil has crashed to an astonishing three-year low, trading at just $63 per barrel. With exporting countries looking to boost production, there's no sign of oil prices recovering any time soon. According to Aitkazin, this is putting immense pressure on the Tenge.
The National Bank of Kazakhstan echoes these sentiments, pointing the finger at a sharp decline in risk appetite, a tumble in the value of risky assets, a slump in major U.S. stock indices, and, of course, the slide in oil prices, as the key drivers of the Tenge's exchange rate declines.
Amidst the oil drama, the currencies of emerging markets and commodity-based economies are showing similar cracks. From March 31 to April 7, the emerging markets currency index dropped 1.8%, with the South African rand slipping 7.3%, the Russian ruble shedding 3.8%, the Brazilian real losing 3.5%, the Indonesian rupiah falling 1.5%, and the Mexican peso slipping 1.1%.
So, is there hope for the Tenge? While the road ahead may be bumpy, all hope isn't lost. Kazakhstan and the National Bank are taking steps to keep things under control. Stay tuned for updates on this developing story.
[1] Aitkazin, Galymzhan. (2023, April 11). Tenge continues to lose positions. [Telegram channel post].
[2] The Astana Times. (2023, April 12). Recent volatility in the Kazakh tenge caused by falling oil prices and U.S. tariffs. [Online article].
- The controversies surrounding U.S. tariffs, as well as the volatile Brent crude oil prices, have been blamed for the Kazakh Tenge's instability by renowned economist Galymzhan Aitkazin.
- The National Bank of Kazakhstan recently acknowledged that the decreased risk appetite, falling value of risky assets, slump in major U.S. stock indices, and the decline in oil prices are the main factors contributing to the tenge's exchange rate declines.
- The energy industry, particularly the volatile oil prices, has a significant impact on the average economy of Kazakhstan, according to experts, as the country heavily relies on oil exports.
- The finance sector, observing the tumbling tenge and instability in the emerging markets, is following the Kazakh situation closely, as the fate of the tenge may reflect broader challenges faced by commodity-based economies.
