The Kazakh tenge fell by almost 25% against the US dollar in a single day last week as the authorities announced an end to the dollar peg and a shift to a free-floating currency regime. The tenge rallied a little after the collapse, but remains sharply lower.
Two headwinds forced the government’s hand. Firstly, Kazakhstan’s two biggest trading partners are Russia and China. With the Russian rouble plunging in value last year, and China devaluing earlier this month, Kazakh exports became increasingly uncompetitive.
A possible US interest rate rise threatened to cause more pain for the tenge. Secondly, oil prices have fallen sharply in the past few weeks, undermining the economy of central Asia’s biggest crude oil exporter. Which nations might follow Kazakhstan? The Saudi riyal and the UAE’s dirham are uppermost in the market’s sights.