Kazakhstan says to devalues currency by 19%

ALMATY: Kazakhstan said on Tuesday it would allow its national tenge currency to devalue by 19% to about 185 per dollar because of a decline in other emerging market currencies and in order to try to prevent large-scale speculation on the forex market.

Shortly after the announcement by the central bank, the official rate of the tenge fell to 163.90 to the dollar from 155.56 on Monday.

The bank said it would ease support of the tenge and reduce currency interventions. It said its decision was coming into force immediately.

The bank said its move had been prompted by volatility on international markets caused by the US Federal Reserve System's gradual withdrawal of its quantitative easing policy.

"There is currently a capital outflow from emerging markets to the developed ones, which has created pressure on emerging market currencies," the central bank said in a statement.

Northern neighbour Russia remains Kazakhstan's main trade partner, and the bank said its move had also been prompted by "the uncertainty of the exchange rate of the rouble".

The rouble has declined by 5% against the dollar since the beginning of this year.

The devaluation of the tenge was also a move to prevent speculative trade on the internal foreign exchange market, the central bank said.

"In order to avoid instability on the financial market and in the economy in general, the National Bank will establish a corridor of tenge rate fluctuations at a level of 185 per dollar plus/minus 3 tenge," it said.

Last September, Kazakhstan's central bank pegged the national tenge currency to a basket of foreign currencies, including the dollar, the euro and the rouble, introducing a system similar to that used by Russia – Reuters.