The foreign exchange market in Kazakhstan demonstrated notable shifts in December 2024, shaped by a weakening tenge, changing trading volumes, and proactive measures from the National Bank. These developments underscore the complexities of the current economic landscape and the strategies employed to ensure stability, DKnews.kz reports.
Tenge Depreciation and Market Trends
By the end of December, the tenge had depreciated by 2.5%, reaching a rate of 525.10 KZT per US dollar. This depreciation reflects increased demand for foreign currency amid constrained supply, a trend observed throughout the month.
- Average daily trading volume: Declined from $262 million to $254 million.
- Total trading volume: Reached $5.3 billion, underscoring sustained market activity despite the slight contraction.
The heightened demand from economic agents further emphasized the need for measured interventions to stabilize the market.
Role of the National Fund in Stabilization
The National Fund played a crucial role in ensuring liquidity and supporting transfers to the republican budget.
- Currency sales in December: Reached $900 million, accounting for 17% of the total trading volume or approximately $43 million per day.
- Market neutrality principle: The National Bank adhered to a consistent and balanced approach in managing these transactions, ensuring minimal disruption to market dynamics.
Looking ahead to January 2025, based on government projections for budget transfers, the National Bank anticipates selling $750 to $850 million from the National Fund.
UAPF Currency Assets and Investment Policy
As of the end of 2024, the share of foreign currency assets in the Unified Accumulative Pension Fund (UAPF) stood slightly above 40%.
- Currency purchases: No acquisitions of US dollars were made for the UAPF investment portfolio in December, and no such purchases are planned for January 2025.
This stability in policy reflects a focus on maintaining balanced asset management within the fund.
Foreign Exchange Interventions
To mitigate destabilizing exchange rate fluctuations and ensure adequate foreign currency supply, the National Bank conducted targeted interventions in December.
- Intervention volume: Totaled $307.6 million for the month.
- Goals of interventions: Focused on smoothing excessive volatility in the tenge exchange rate and addressing specific market periods of heightened demand.
These measures played a vital role in preventing sharper fluctuations and stabilizing the exchange rate.
Future Prospects for the Tenge
The National Bank remains committed to its flexible exchange rate policy, which prioritizes economic stability, prevents the accumulation of imbalances, and preserves gold and foreign exchange reserves.
In the short term, the trajectory of the tenge will depend on several factors:
- Market expectations: Sentiments among participants regarding economic and market conditions.
- Quarterly tax payments: Seasonal inflows and outflows related to fiscal cycles.
- Global market dynamics: Trends in global currency markets and commodity prices.
- Geopolitical developments: External influences shaping regional and global economic conditions.
Transparency remains a cornerstone of the National Bank’s strategy, with continued disclosure of foreign exchange operations ensuring public and market confidence.
Previously Reported: Business Activity Index
In addition to updates on the foreign exchange market, the National Bank provided insights into business activity trends for December 2024. The Business Activity Index (BAI) stood at 50.7, indicating that the economy remained in the growth zone despite a slowdown in key sectors.
- Sectoral trends: Declines in manufacturing, services, and mining dragged the index downward, while construction demonstrated robust growth, with its index rising to 52.9.
This mixed performance highlights the resilience of the construction sector amidst broader economic challenges, reflecting potential areas for policy focus and economic support.
Kazakhstan’s foreign exchange market in December 2024 reflected both challenges and adaptive responses. While the tenge experienced depreciation and trading volumes slightly declined, the National Bank’s proactive measures, including foreign currency sales and interventions, ensured market stability. The resilience observed in sectors like construction further underscores the economy’s potential to navigate uncertainties.
As the National Bank continues to adhere to its flexible exchange rate policy and prioritize transparency, the economic outlook for 2025 remains cautiously optimistic, with a focus on addressing both external and domestic factors shaping market dynamics.
Previously Reported
The National Bank also provided data on business activity for December 2024. The Business Activity Index (BAI) stood at 50.7, indicating that the economy remained in the growth zone. However, a slowdown in activity was observed in manufacturing, services, and the mining sector. The construction sector, on the other hand, demonstrated positive dynamics, with its index rising to 52.9.
Thus, Kazakhstan’s economy continues to show resilience amid the weakening of the tenge and declining trading volumes in some sectors. The flexible exchange rate policy and
