Analysis: last week firming of the dollar in Kazakhstan became a trend

/IRBIS, Dec.06, 99/ - Last week in Kazakhstani exchange market for the dollar had a main distinctive feature: after two months of firming of tenge, exchange rate of the dollar grew from session to session. After passing one week, it can be said for sure that this is not a technical correction of the exchange rate following the prolonged fall of the dollar. A new trend has appeared in the market, which can be perceived as a long term. Average growth rate of an American currency is characterized by a trend of 19.4% APR. There are some other features. On three out of five trades volume of operations at KASE were minimal. These days demand for the dollars of the banks of the second tier depended on supply, which indicates wait-and-see positions of the banks. There were no outrageous events in the market. As employees of exchange booths (EB) of Almaty point out, on Friday demand of the population for dollars in cash soared. Most likely, it was caused by payment of salaries. Increase in solvency of EB clients coincided with a growth of devaluation expectations due to recent systematic firming of the dollar in currency market of the country. For this reason dollar quotations in interbank market jumped on Friday, and on Monday, December 6, an organized and one sided demand of the banks of the second tier for an American currency was observed at KASE. However, head of the National Bank Grigorii Marchenko, in his interview to KHABAR TV channel (its fragments will be shown in "Business-KHABAR" tonight), is not apt to dramatize the situation. He did not deny, as the dealers say, the market had found "its bottom" last week and the trend of growing American currency had to be considered long term trend. However, Marchenko emphasized on wait-and-see position of the banks and absence of outrageous situations in the market. In Mr. Marchenko's opinion, prolonged firming of the tenge was not accidental and was not fostered by the head bank of the country. Positive payments balance of the country stimulated formation of an excessive supply of dollars in domestic market - "a cap", which was bought by the National Bank, thus increasing the monetary base. Further firming of the tenge with an increased up to 1.7% inflation in November is not practical. The market understood this. As a result, demand and supply got almost balanced now. The National Bank does not hinder a gradual growth in the exchange rate of the dollar, since the inflation in the US and here, when the balance is found, takes a special meaning. Grigorii Marchenko said the National Bank would try to synchronize the inflation rate with devaluation rate in Kazakhstan during remaining time this year and next year. Now, inflation grew some, hence the dollar is going up too. The head of the National Bank did not express concern about the possibility of transforming the current new trend into uncontrolled process. Reserves of the National Bank grow constantly. The market will be positively affected by repayment of euronotes on December 20, which is undoubted. Moreover, the World bank will grant $120-$170 mln in December, which will also replenish the reserves. The Ministry of Finance has not sold yet all the dollars received from placement and additional placement of euronotes of the third issue. An active sale of dollars in domestic market by private structures (mainly by exporters) to get tenges to wrap up annual financial statements and settlement of contractual obligations, in Marchenko's opinion, should be added to a row of stabilizing factors. Summarizing all these, IRBIS specialists are inclined to assume next week dollar will continue its growth in domestic market, and devaluation rate in the first half of December will be (that is in case of absence of dollar supply from private structures) regulated by the National Bank if necessary and will hardly exceed 15- 20% APR.