Analysis: a new trend has formed on currency market of Kazakhstan

/IRBIS, Feb.14, 00/ - The period from February 7 through 11 was characterized by an increased activity of the participants and by the formation of a new trend of the U.S. dollar exchange rate towards the tenge. Gradual firming of the national currency turned into a growth of USD. Other foreign currencies practically did interest the traders. Not a single deal was made neither in Deutsche mark not in euro at Kazakhstan stock exchange (KASE). Firming of the dollar at KASE began as far back as on Thursday, February 3, when a few banks of the second tier (BST) made an attempt to raise the exchange rate of USD. But the main impulse was received by the market on Friday, February 4. By this day some of the dealers, who represent the major banks, were able to determine by the general mood of the market and the behaviors of the their colleagues that the dollar was a little oversold, the market was somewhat "short", and that the exchange rate of the dollar had a support level which does not let it to fall even further. Relatively high inflation in January allowed for some growth in the exchange rate of USD. Under this conditions raising the exchange rate of the dollar could be successful. This time a stable and absolutely balanced market of the American currency could be disturbed for a short time. Precise calculations proved to be good. Traders, who were in short positions for long, began to close them and gradually buy dollars at growing prices. Monday (February 7) showed the market was able to conceive the new impulse. Results of the trade show that dealers comprehend a speculative nature of the disturbance, and therefore, they are not in hurry to increase the demand for dollars. In current situation there are no grounds for a serious firming of the dollar. However, the trend was conceived, because it "started" on time, and the market is turning around now. Dealers weight each next step and they are very cautious. It seems as if nobody is waiting for a significant growth in the exchange rate of the dollar, since the market is still balanced. But gradual rise in the price of USD is more likely to be supported by the participants for some time. However, on Wednesday the general mood of the market changed some. Under the limited tenge liquidity, caused mainly by the necessity of transferring the funds for SS purchased during the week, demand for USD fell, but supply of the American currency fell even more. The forecasts of the dealers regarding inactivity of the exporters on currency market in the next ten days of February was becoming more apparent. Devaluation expectations has grown. It caused the growth in the exchange rate of USD to accelerate at KASE on February 9 and the market to reorient itself for further firming of the American currency. In such situation on Wednesday the National Bank offered the investors their favorite instrument - short term notes which certainly have high demand. But if in last three weeks the emitter was using this demand mainly to decrease the yield of the notes by refraining itself to small borrowing amounts, now, it preferred to clean up correspondent accounts of the banks. Yields of the notes were left at previous levels, but the borrowing amount reached KZT1,633.0 mln. Since the National Bank had to repay the notes for a total of KZT3,502.4 mln the clean up was done on time. Growth rate of the dollar sharply decreased at KASE on Thursday, and afternoon quotations noticeably "subsided" under the temporary deficit of tenge on the market. On Friday weighted average rate of the dollar at the Exchange decreased as well, and the results of the evening trades made an impression of complete normalization of the market and return to an equilibrium. The week resulted in 44 point firming of the dollar against tenge or 0.32% (at weighted average rate of the main session), which corresponds to an average of 16.55% APR. Previous week has left ambiguous impressions. As the dealers said "the market is looking upward". There are devaluation expectations on the market that were stimulated by an increase in official rate of the dollar up to 139.65 from 139.45 tenge. On the other hand, there is no deficit of the dollar, and exchange rate fluctuations are within working conditions where it is risky to open long positions (to buy dollars with the hope for increase in their price) without a careful judgement. There is also a position of the country's head bank, which is not interested in fast devaluation caused by speculative games of the BST. Repayment of notes on February 10 and 11 were practically neutralized by Wednesday placement of notes, Thursday placement of MEKAVM-12 and Friday placement of MEKAVM-9. And actual USD quotations of the Exchange on Thursday evening indicate restricted attitudes of the dealers towards current events. Thus, based on an analysis of current situation it is hard to presume essential changes in the market conjuncture for the dollar in the week that just began. It is quite possible that some banks will try to raise the exchange rate of the dollar further, but this initiative is unlikely to be supported by the most of the traders due to high risk of opening long positions in current situation and sufficiency of dollars on the market. Therefore, even if the dollar exchange rate will grow, rate at which the American currency might firm will be small. It should be said also that activation of the market and its transparency was caused by a temporary cancellation of commission fees at KASE trades in foreign currencies. It caused volumes of the trades to increase significantly (please, see tables and graphs), and the banks to work quite actively on the day and evening sessions of the Exchange as well. Making deals with TOM and SPOT terms made it easy to make short term forecasts and prevented the creation of emotions induced by unjustified forecasts.