Analysis: New trend was formed on the currency market of Kazakhstan

/IRBIS, Jan.21, 00/ - From January 17 to 21 a new trend was formed on the currency market of Kazakhstan: after a week and a half growth in the exchange rate of the dollar tenge began to gain against the major reserve currency of the world. Tendencies, typical to the beginning of the year, were on the market on January 17. They were characterized by a high demand for the U.S. dollars from the banks and their clients, and from the population - for cash dollars. The latter, in dealers' opinion, was felt mainly in peripheral regions of the country and stimulated the demand at KASE. But even on January 17 the market was not so active as it was in previous one and a half weeks. 45 point increase in the official exchange rate of the dollar in Friday evening had a certain impact on the overheat of the market on Monday. It had affected the trades as 24 point growth in USD rate at the Exchange. As interbank quotations showed in the afternoon of that day, the market did not accept this rate of increase in USD and it seemed to be exhausted of an uninterrupted currency race late that day. In the next days of the week activity of the trades decreased significantly, and the demand of the banks of the second tier gradually went down to zero. Dealers observed a decrease in the activity of the interbank market. One of the reasons for the demand to fall - is the decline in the solvency (liquidity) of the banks and the population. The former restored their currency positions, but there were no inflows of tenge into the market. The National Bank and the Ministry of finance were actively borrowing money at the auctions for offering SS. Moreover, correspondent accounts of the banks were cleaned up when they were purchasing foreign currency. The latter - the population - have already spent the money, they received when the wages and the pensions were paid off in December, and there were ample of time till the next payments. The market was saturated with the dollars with the current amount of cash and non-cash tenge in circulation. But the major reason behind the decrease in the demand of the banks was tax payments to the budget made by their clients. Such incident does not cause much liquidity problems to the most of the major financial institutions, since appropriate measures are taken. However, even their dealers were temporarily confined while their clients were making year-end payments. There was an growing shortage of tenge in the market on Tuesday, January 18. The banks are not capable of buying dollars, and some of them, on the contrary, are selling them. For the first time this year, the exchange rate of the dollar begins to fall. The same day the Ministry of finance offers the market the third issue of nine months MEKAVM just on time, and for them investors pay an equivalent of 14.4 mln U.S. dollars. More precisely, the payments for the securities were made on Wednesday, which worsens the short term liquidity of the BST. Wednesday trades went with minimum activity of the traders and minimum transaction volumes. Tenge keeps growing. Placement of short term notes of the National Bank on Wednesday and Thursday helps the head bank of the country to prevent possible increase in the demand for the dollars on these days. These placements actually neutralized the repayment of KZT2,631.6 mln for previously issued notes. Therefore, on Thursday demand did not exist at KASE either, exchange rate of the dollars fell, volume of deals got to its lowest level, and interbank quotations of the American currency did not exceed the Exchange's price of USD in the afternoon. Activity of the Exchange trades grew on Friday only. But it happened not because of reemerging demand. BST were selling dollars, including - exporters' earnings, because it was more profitable to sell them on the Exchange considering the ratio of the dollar prices at KASE and on interbank market. Considering the end-of-week results it can be said the market has found its new equilibrium point, from which the exchange rate of USD will go down. However, the price of the shortest money, which grew 2-2.5 times under the influence of tenge shortage within a week, returned to previous level on Friday. In the last evening of the week there were no shortages of tenge. But the results of the day show that the banks will hardly try to increase their currency positions. The market is already saturated with the dollars. Taking into account all these, it can be assumed significant changes in the exchange rate of the dollar will not happen in the next coming week. The exchange rate may well remain on the attained level. But the dealers note the exporters' earnings appeared in the market. They were absent in the first half of January. And large volumes of dollar supply can cause some firming of the tenge in current situation.